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Under the hot spots of DeFi, Polkadot, Filecoin, etc., the “veteran” Litecoin, which is rumored to have ceased development, suddenly emerged this year. It rose by 42% in the past month and has become a topic of concern in the industry. What is the reason? What is the future trend?
According to wind data, since the beginning of the year, the best-performing varieties of global asset returns are: Bitcoin (160.13%), FAAMNG (48%), LME copper (25.76%), South Korea KOSPI (25.57%) , CSI 300 Index (23.66%). Litecoin’s return rate is nearly 92%, second only to Bitcoin on the list, and outperforms FAAMNG (the six giants in the Internet industry), which ranks second.
It can be seen from the Trading view chart that Litecoin and Bitcoin price trends are highly positively correlated. There are two points worth paying special attention to: one is that the price volatility of Litecoin is higher than that of Bitcoin; the other is that in the first three months of the beginning of the year, the rate of return on Litecoin’s price outperformed Bitcoin, with a peak value even 50% higher than that of Bitcoin.
Anti-inflation Litecoin is driven by Bitcoin
From a macro perspective, in order to cope with the potential economic recession and the new crown pneumonia epidemic and overcome the lack of liquidity in the US dollar, the Fed’s approach is to implement an “uncapped” quantitative easing policy. Loose monetary policy. As the new crown epidemic continues, Japan, Australia and the European Central Bank are also taking similar measures. It is foreseeable that inflation and legal currency depreciation will be a protracted battle. Under such circumstances, mainstream cryptocurrencies led by Bitcoin have natural anti-inflation properties and are bound to be more favored by capital.
Litecoin came out on the basis of Bitcoin’s code. The main idea is to overcome the related problems that plague Bitcoin. Therefore, Litecoin has more advantages in transaction speed and transaction fees, so it is suitable for micropayments.
But in fact, there is no actual data showing that Litecoin is more likely to be adopted by merchants. In the cryptocurrency field, there is also competition such as smart contract platforms. What’s more, the cryptocurrency developed in the direction of micropayment is difficult to compete with traditional Internet mobile payment.
Therefore, talking about value here 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, the Litecoin Lightning Network was officially launched;
On December 26, 2017, Lightning Network logged onto the Bitcoin mainnet, and the first transaction was announced as successful.
In February 2019, Li Qiwei announced plans to introduce the MimbleWimble privacy protocol in the Litecoin upgrade.
In key technologies, Litecoin has acted as the “guinea pig” of Bitcoin. Perform technical verification on Litecoin, and it will run on Bitcoin if it is stable and feasible. From Segregated Witness to Lightning Network to the MimbleWimble privacy protocol, we can see that Litecoin is not without technology. On the contrary, compared to Bitcoin, Litecoin is also forward-looking. As a testnet for Bitcoin, this is its unique value.
Big Bookmaker Grayscale Brainless Purchase
As of December 4th, the average daily number of Litecoin mined was 7,400+, and the current holdings of Grayscale Litecoin were 887,009, with an average daily increase of nearly 5,000, accounting for about 67% of the average daily mined number. Nearly 2/3 of the newly added Litecoin flowed into the pockets of Grayscale institutions, and the secondary market circulation decreased accordingly, which is expected to stimulate Litecoin to continue to strengthen.
According to the statistics of qkl123, as of December 4, the premium of Litecoin Grayscale Trust was 2677.09%. In other words, buying Litecoin on the exchange requires 84 US dollars, and buying the same amount of Litecoin on the secondary market of the US stocks will cost about 2300 US dollars. Over the same period, the Bitcoin Trust premium rate was only 27.51%. The data shows that compared with Bitcoin, US retail investors have greater enthusiasm and demand for Litecoin.
On October 21, the 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 worldwide use PayPal and support millions of online stores. PayPal’s support for cryptocurrency will make digital currency gain more attention and utility, more and more people will accept and use cryptocurrency, and the boundary between traditional legal currency and cryptocurrency will become blurred.
However, it is worth noting that PayPal does not allow users to withdraw cryptocurrencies and can only be used in their accounts. Secondly, Bitcoin is defined as a commodity in the United States. Buying and selling will involve taxation. In general, PayPal’s entry into cryptocurrency should have more advantages than disadvantages. The supported cryptocurrencies such as Bitcoin and Litecoin have boosted the price of the currency.
What is the future trend?
The MVRV indicator is a medium- and 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 a cycle low; when 4<MVRV<5, it means that the price is seriously overestimated.
In the past three years, the LTC-MVRV ratio has basically maintained between 1-3, and its peak is basically consistent with the peak of the bull and bear market. At the peak of the bull market in 2017, MVRV was as high as 4.03, and during 312 in 2020, MVRV was as low as 0.5. In the past two months, the LTC-MVRV ratio has remained approximately in the range of 1±0.2, which is an underestimated range.
The SOPR indicator is a short-term indicator, which is used to judge whether the short-term is top or bottom. It needs to be judged in conjunction with a period of time. When SOPR>1, it means that the investor who has spent the output is in a profit state when trading; otherwise, it is in a loss state. In 2020, the LTC-SOPR value fluctuates below 1 most of the time, and the corresponding price is generally in a volatile trend. However, since October, SOPR has remained above 1 as a whole, indicating that the current market sentiment is relatively optimistic and the currency price is also in an upward phase .
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