Bitcoin Gold and Litecoin Silver Reappeared as Two Major Rising Powers of Litecoin. What is the Future Trend?

Amid the hot topics of DeFi, Polkadot, and Filecoin, Litecoin, a "veteran" that was rumored to have stopped development, suddenly emerged this year, rising 42% in the past month, becoming a topic of concern in the industry. What is the reason? What will be its future trend?

From a macro perspective, in order to cope with the potential economic recession and the COVID-19 pandemic and overcome the lack of US dollar liquidity, the Fed has implemented an "unlimited" quantitative easing policy. Loose monetary policy. As the COVID-19 pandemic continues, central banks in Japan, Australia and the European Union are also taking similar measures. It is foreseeable that inflation and fiat currency depreciation will be a protracted battle. In this case, mainstream cryptocurrencies, led by Bitcoin, have natural anti-inflation properties and are bound to be more favored by capital.

Litecoin was created based on the Bitcoin code, with the main idea of ​​overcoming the problems that plague Bitcoin. Therefore, Litecoin has more advantages in transaction speed and transaction fees, so it is suitable for small payments.

However, in fact, there is no actual data to show that Litecoin is more likely to be adopted by merchants. In the field of cryptocurrency, there are also competitions such as smart contract platforms. Moreover, it is difficult for cryptocurrencies developed in the direction of small payments to compete with traditional Internet mobile payments.

Therefore, when we talk about value here, it is the value of Litecoin based on Bitcoin.

On May 10, 2017, Litecoin activated Segregated Witness;

On August 8, 2017, the Bitcoin Segregated Witness upgrade was officially locked.

On June 21, 2017, Litecoin Lightning Network was officially launched;

On December 26, 2017, the Lightning Network was launched on the Bitcoin mainnet, and the first transaction was declared successful.

In February 2019, Charlie Lee announced plans to introduce the MimbleWimble privacy protocol in the Litecoin upgrade.

In terms of key technologies, Litecoin acts as a "guinea pig" for Bitcoin. Once the technology is verified on Litecoin and it is stable and feasible, it will run on Bitcoin. From Segregated Witness to Lightning Network, to MimbleWimble Privacy Protocol, we can see that Litecoin is not without technology. On the contrary, compared with Bitcoin, Litecoin is also forward-looking. As a test network for Bitcoin, this is its unique value.

Big dealer Grayscale no-brainer purchase

As of December 4, the average daily number of Litecoin mined was 7,400+, and Grayscale currently holds 887,009 Litecoins, with an average daily increase of nearly 5,000, accounting for about 67% of the average daily number of mined coins. Nearly 2/3 of the newly added Litecoins flow into the pockets of Grayscale institutions, and the circulation in the secondary market decreases accordingly, which is expected to stimulate Litecoin to continue to strengthen.

According to qkl123 statistics, as of December 4, the Litecoin Grayscale Trust premium was 2677.09%. In other words, it costs $84 to buy Litecoin on an exchange, and it costs about $2,300 to buy the same amount of Litecoin in the U.S. secondary market. During the same period, the Bitcoin Trust premium rate was only 27.51%. This data shows that compared with Bitcoin, American retail investors have greater enthusiasm and demand for Litecoin.

On October 21, payment giant PayPal announced that it will allow users to buy, hold and sell a variety of cryptocurrencies including Bitcoin on the platform, including Litecoin. More than 200 million consumers around the world use PayPal, which supports millions of online stores. PayPal's support for cryptocurrencies will bring more attention and utility to digital currencies, and more and more people will accept and use cryptocurrencies, and the boundaries between traditional legal currencies and cryptocurrencies will become blurred.

But it is worth noting that PayPal does not allow users to withdraw cryptocurrencies, and they can only be used within their accounts. Secondly, Bitcoin is defined as a commodity in the United States, and buying and selling it will involve tax issues. Overall, PayPal's entry into the cryptocurrency market should have more advantages than disadvantages. The cryptocurrencies it supports, such as Bitcoin and Litecoin, have boosted the price of the currency.

What will be the future trend?

The MVRV indicator is a medium- to long-term indicator, which can be understood as the degree of deviation between short-term demand and long-term supply in the secondary market. When MVRV < 1, it means that the price is underestimated, which often corresponds to the trough of the cycle; when 4 < MVRV < 5, it means that the price is seriously overestimated.

In the past three years, the LTC-MVRV ratio has basically remained between 1 and 3, and its peaks have basically coincided with the peaks of the bull and bear markets. At the peak of the bull market in 2017, the MVRV was as high as 4.03, and during the 312 period in 2020, the MVRV was as low as 0.5. In the past two months, the LTC-MVRV ratio has been approximately maintained in the range of 1±0.2, which is an underestimation range.

The SOPR indicator is a short-term indicator used to determine whether the short-term peak or bottom is a period of time. When SOPR>1, it means that investors who have spent outputs are in a profitable state when trading; otherwise, they are in a loss state. In 2020, the LTC-SOPR value fluctuated below 1 most of the time, and the corresponding price was in a volatile trend. However, from October to now, SOPR has remained above 1, indicating that the current market sentiment is relatively optimistic and the currency price is also in an upward stage. (Special author: K Editor: Wu said blockchain pictures from Sangbi Notes)