Like a number of different cryptocurrencies, Litecoin (CCC:LTC-USD) has some spectacular, very helpful attributes. But in addition like most different cryptocurrencies, Litecoin doesn’t look well-positioned to beat the big hurdles that the asset class faces.
Moreover, Litecoin’s constructive points will doubtless be offset by an essential weak spot. Given these factors, I urge longer-term traders to promote the cryptocurrency.
As a number of reporters and different pundits have identified, Litecoin does have some substantial deserves.
Particularly, Litecoin processes transactions much more quickly and for approach much less cash than Bitcoin (CCC:BTC-USD). And in accordance with InvestorPlace columnist Wayne Duggan, Litecoin is sort of dependable and liquid.
Crypto’s Hurdles Are Prone to Journey Up Litecoin
In previous columns, I’ve identified a few of the issues that cryptocurrencies face. Most significantly, governments and huge banks seem like against cryptocurrencies, as proven, for instance, by the destructive feedback by Treasury Secretary Janet Yellen about the asset class.
And governments can take essential steps to fight the efficacy of cryptocurrencies. Notably, the IRS has made each cryptocurrency transaction topic to capital good points taxes, and the Division of Justice recently recovered about half of the Bitcoin-denominated ransom paid to the perpetrators of the cyberattack on Colonial Pipeline. With the latter motion, the federal government confirmed that cryptos will not be as inaccessible to regulators as many had believed, undermining the belief of traders and customers in them.
Like many others, I consider that governments and huge banks will take further steps to undermine cryptocurrencies. I wouldn’t even be shocked if the U.S. authorities and lots of different Western democracies successfully ban or partially ban cryptos sooner or later, citing their use by criminals.
Whereas a number of giant firms, together with PayPal (NASDAQ:PYPL), Expedia (NASDAQ:EXPE) and Starbucks (NASDAQ:SBUX) accept Bitcoin as a method of payment, far fewer firms settle for Litecoin, with PayPal as one of many solely notable firms supporting it. So even when cryptos do survive and thrive, Litecoin will probably be at a significant drawback to the primary movers within the sector, Bitcoin and Ethereum (ETH-USD). As I identified in earlier columns on Ethereum, a lot of giant establishments are using it.
The Withdrawal of Authorities Stimulus
Transferring again to traits which might be prone to harm all cryptocurrencies, I consider that there’s a direct correlation between stimulus from Congress, the inventory market, the Federal Reserve and the costs of cryptocurrencies.
Take into account that the last huge boom of cryptocurrencies occurred in 2017. Doubtless not coincidentally, in the identical yr a large tax minimize was signed into regulation and the stock market rallied tremendously. With many individuals feeling a lot richer on account of the inventory increase and believing they have been about to have extra disposable revenue on account of the tax minimize, crypto costs jumped. Because the wealth impact light, nonetheless, the crypto bubble popped in 2018.
Quick ahead to 2021. Congress, the Fed, and the inventory market have mixed to place an excessive amount of additional disposable revenue in People’ financial institution accounts. It’s fairly cheap to consider that, because the stimulus is withdrawn and the inventory market decelerates, cryptos will tumble once more.
Including to cryptos’ energy earlier this yr, People had saved an excessive amount of cash by not commuting to work and by drastically curbing their indoor leisure actions outdoors their properties.
The Backside Line on Litecoin
I consider that we’re seeing the start of the consequences of the unwinding of all of those traits on all cryptos, together with Litecoin. Within the month that ended on June 11, for instance, Litecoin tumbled from round $377 per U.S. greenback to simply $165 per U.S. greenback.
Along with the numerous hurdles that every one cryptos face, Litecoin has to fight the appreciable first-user benefit of Bitcoin and Ethereum. Because of this, I like to recommend that traders promote their Litecoin holdings.
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On the date of publication, Larry Ramer didn’t have (both straight or not directly) any positions within the securities talked about on this article.
Larry has performed analysis and written articles on U.S. shares for 14 years. He has been employed by The Fly and Israel’s largest enterprise newspaper, Globes. Amongst his extremely profitable contrarian picks have been photo voltaic shares, Roku, Plug Energy and Snap. You may attain him on StockTwits at @larryramer. Larry started writing columns for InvestorPlace in 2015.