Bitcoin > Litecoin
Litecoin used to be in the top 10; if we look at this historical snapshot, we can see that Litecoin was second in terms of market capitalization, after bitcoin, and then XRP and a few other coins we’ve never heard of.
Litecoin has moved down the list and is now number 13 by market cap. Litecoin was made fairly early on. It was made on October 7, 2011, by Charlie Lee, who I think used to work as an engineer at Google. Litecoin is basically a copy and paste of Bitcoin that replaces the well-known proof of work caching algorithm SHA-256 with another proof of work algorithm called s script. I think that’s the right way to say it. Litecoin is also different because its block times are only 2.5 minutes, while Bitcoin’s average block times are 10 minutes. This is because litecoin’s Max Supply is four times that of bitcoin’s.
Charlie Lee marketed Litecoin as the silver to Bitcoin’s gold. I’ve always thought that this was a huge red flag. The reason silver was used under a gold standard or a bi-metallic standard was because silver coins were used for small amounts of money. For example, it’s hard to buy a cup of coffee with a bar of gold because gold is so dense and expensive. Obviously, there’s no reason to make a whole new coin for smaller amounts. One coin is already or can be divided into 100 million satoshis or SATs, and if we ever need to divide SATs even further, it will be very easy to do so. Of course, this only becomes a problem when the value of one side approaches dollar parity once that equals one US Dollar, which would mean a price per Bitcoin of 100 million dollars, so this is a very high-class problem to have now.
Charlie Lee is a very smart engineer, so I have to assume that “silver to bitcoin’s gold” was just a marketing slogan. It’s a good marketing slogan. If something is digitally divisible, you don’t need a whole new coin for smaller amounts. The bigger question is whether or not Litecoin can really compete with Bitcoin. The problem for Litecoin is that Bitcoin has been around for two years longer than Litecoin has. Bitcoin is the “grandfather” or “father” of all these coins, while Litecoin has only been around since 2011. Litecoin has been trying to catch up, but it hasn’t been able to do so, and it’s been slipping down the rankings quite badly. Bitcoin has a much stronger global brand than Litecoin. If you ask any small child or grandparent, most of them will have heard of Bitcoin, but I can almost guarantee that they haven’t heard of Litecoin.
This means that Bitcoin has a much stronger global brand than Litecoin. Another small problem: the creator of Litecoin didn’t believe in it enough to hold any. This tells you a lot: don’t listen to what people say, watch what they do. Charlie Lee dumped all of his coins in December 2017, while Satoshi has never moved or sold a single sat. He said he did this because he thought there was a conflict of interest, etc., and there may have been because he’s a living founder, but it’s never a good sign when the founder of your project completely leaves the project. We can see where Charlie Lee left: he left in December 2017, and then there was a long down period. Litecoin made a small new high in U.S. dollars during the last bull market, but it has since fallen back to its bear market levels from the last bear market. Now, Litecoin supporters are very excited about some Bitcoin Maxis who have been talking about it as a digital commodity.
In this interview with Michael Saylor, he says that he thinks Litecoin might be able to qualify as a commodity. If that happens, Litecoin wouldn’t have to register with the SEC. Memes like “Bitcoin Maxis Unite: Litecoin is a Commodity Like Bitcoin,” which feature well-known bitcoiners, say that Litecoin is a commodity like Bitcoin. The only problem with this argument, in my opinion, is that just because something is considered a commodity by U.S. regulators or security regulators or commodity regulators doesn’t mean it’s valuable or worth investing in. It just means you won’t have as many problems with the SEC. As I write this, Bitcoin has a fully diluted market cap of $353 billion and a daily trading volume of $21 billion to $22 billion, according to coin market cap. In contrast, Litecoin has a much smaller fully diluted market cap of about $6.5 billion and a daily trading volume of $631 million.
This means that if I’m an Institutional Investor, I can’t easily buy a billion dollars’ worth of Litecoin, which would be about 15 percent of the current market. Why does market cap matter? Why is liquidity important? Well, market cap is important because it’s a good way to tell how much demand there is for a project. If we look at that, we can see that the demand for Bitcoin is many, many times bigger than the demand for Litecoin, and that’s how the market is pricing the whole protocol. Why is liquidity important? Well, if we want Bitcoin to become the world’s new money, we need to make sure there’s a lot of it It needs to be able to handle large positions from institutional investors like endowments and pension funds, as well as large corporations like microstrategy, central banks, and even nation states. It will be hard for Litecoin to ever catch up and have the same depth and liquidity as Bitcoin, because when something is more liquid, bigger players tend to go there.
Market, the obvious answer is that you shouldn’t because the US dollar is a fiat currency. This means that it can be printed indefinitely, isn’t scarce, and is easy to control. If you don’t believe me, just ask Russia, Libya, or anyone else who’s had their bank accounts frozen. This is why the liquidity, depth, and market cap arguments don’t really apply to fiat because it’s a very different thing. The market prices also seem to support our conclusions, since we saw that the market cap of Litecoin is much higher than that of Bitcoin. Litecoin’s price chart against Bitcoin shows a series of lower highs and lower lows, and Litecoin didn’t make a new high against Bitcoin even during the great bull market of 2020 to 2021.
This is a chart of Litecoin versus Bitcoin. When the chart goes up, it means that Litecoin is getting stronger against Bitcoin. When the chart goes down, it means that Bitcoin is getting stronger against Litecoin. It looks like Litecoin has had a bit of a Renaissance in terms of its price against Bitcoin since the Ethereum Merge. This may just be a result of Ethereum miners switching their hash power to Litecoin. I don’t know if they can do that with GPUs, but I would assume they can. So we’re seeing a slight bounce of Litecoin in Bitcoin terms, but when you look at the overall pattern, especially in the last few years, you see a pattern of lower lows and lower highs. This is not what you want to see when your project is competing with Bitcoin.
Thanks for reading and would it be too hard to ask you for a follow?
