Litecoin ‘Significantly Overvalued,’ Cryptocurrency Hedge Fund Claims

Proponents of litecoin, the seventh-largest cryptocurrency, have lengthy touted it as “silver to bitcoin’s gold,” the medium of trade to BTC’s retailer of worth. Much like bodily silver, although, litecoin at present trades properly under its all-time excessive, having plunged to about $55 from a peak of $358. However, in keeping with cryptocurrency hedge fund Multicoin Capital, even at that mark litecoin is “significantly overvalued.”

Multicoin, which is brief LTC, lays out its bear case for the asset in a new report, authored by managing associate Tushar Jain.

A Maturing Market and a Diminishing ‘Coinbase Effect’

The Texas-based fund, through Jain, argues that LTC faces a wide range of detrimental catalysts, with no bull case to offset them.

First, Jain alleges that litecoin’s 2017 bull run got here predominantly because of naivety amongst retail traders and immaturity within the cryptocurrency market. As proof, he cites the truth that LTC was the “least expensive per-unit asset on Coinbase,” one of the vital in style buying and selling platforms amongst inexperienced cryptocurrency patrons — the most definitely group to not acknowledge that you would be able to buy fractional cash.

The coin now not bears that distinction, although, since Coinbase listed ethereum classic (ETC) in August and has additional introduced plans to contemplate itemizing a wide range of different property, which guarantees to decrease the impression {that a} Coinbase itemizing supplies for a person cryptocurrency.

Questionable Financials & Development

charlie lee litecoin bitcoin cryptocurrency
LTC founder Charlie Lee bought his complete stake whereas the coin was buying and selling close to its all-time excessive. | Source: SV Ethereum/YouTube

Next, Multicoin argues that the Litecoin Foundation is in a poor monetary scenario to proceed working successfully, holding solely about $322,000 in property — with 82 p.c of these funds denominated in LTC.

Moreover, the agency says that LTC doesn’t have a novel growth roadmap, which helps clarify the dearth of LTC GitHub commits, with nearly all of LTC updates being forked from Bitcoin Core.

Litecoin development
LTC GitHub commits to grasp | Source: Multicoin Capital/Cryptomiso

With these components in thoughts, Jain, like a number of different analysts, referred to as founder Charlie Lee’s choice to sell his entire LTC stake a “red flag,” no matter his acknowledged intentions in so doing.

“Despite his intentions, a misalignment of incentives now exists that decreases his motivation to continue development and add value to the protocol,” Jain wrote. “To better achieve this goal, we would have liked to see him time-lock his holdings or use them to fund further LTC development.”

Sell Pressures

Finally, Multicoin argues that the litecoin value won’t be able to beat the numerous promoting stress it is going to doubtless face within the close to future.

To wit, the report notes that Bitmain — probably the most worthwhile cryptocurrency firm — owns over 1 million LTC, in keeping with a leaked investor deck. The agency, led by CEO Jihan Wu, has been an outspoken supporter of bitcoin money (BCH), which — like litecoin — goals to develop into the web’s “digital cash.” Consequently, Multicoin believes that Bitmain will ultimately dump the LTC, both to supply BCH with value help or to drive litecoin additional into bearish territory.

Even absent that looming threat, LTC faces steady promote stress from mining, a disadvantage which applies to all inflationary and disinflationary cryptocurrencies however whose results can be notably pronounced on an asset already going through vital detrimental catalysts.

Batting Down the ‘Bull Case’ for Litecoin


Meanwhile, Multicoin believes the supposed bull circumstances for litecoin — e.g. that it is a perfect medium of trade and/or a testnet for the Bitcoin community — fail to face as much as scrutiny.

Writing within the agency’s report, Jain takes goal on the narrative that if bitcoin is gold, then litecoin is silver. Jain says that it is a false analogy as a result of, not like bodily gold, bitcoin will doubtless sooner or later develop into a viable medium of trade by means of the adoption of applied sciences just like the Lightning Network (LN).

“Comparing digital assets to precious metals may be a nice analogy, but it does not have any substance. The value of the ratio of silver-to-gold is based on the idea of price-to-weight ratio. A lower price-to-weight ratio makes payments for smaller purchases more convenient. Digital assets are weightless, and thus the same analysis cannot be made.”

Even if there may be room within the cryptocurrency ecosystem for a non-bitcoin medium of trade, Multicoin argues that there is no such thing as a motive why LTC would be the asset that fills this void:

“Litecoin’s adoption is generally shown using qualitative evidence of merchants accepting Litecoin. Merchants accepting Litecoin also generally accept a basket of other cryptoassets because crypto payment processors such as BitPay support many cryptocurrencies. Merchants are not explicitly choosing to support Litecoin payments. Rather, they’re electing to accept payment in any crypto, of which Litecoin is just one.”

Perhaps a stronger case is that, as a member of the “Satoshi family tree,” LTC can function a live-fire testnet for BTC, whose builders have a tendency to maneuver cautiously to protect the community’s safety. Even if true, although, Multicoin argues that there is no such thing as a motive why such a testnet needs to be value $three billion, a lot lest current token holders with any additional upside from that mark.

LTC a ‘Relic of the Pre-Smart Contract’ Age

Summarizing the agency’s place, Multicoin says that whereas LTC could also be traditionally vital, its founding imaginative and prescient has develop into out of date and has not been changed by a viable roadmap. Jane writes, “In truth, Litecoin is a relic of the pre-smart contract platform crypto ecosystem. Perception resulting from these outdated narratives has led to a large divergence between current price and fundamental value.”

He concludes:

“Hovering at approximately $50, we believe LTC is significantly overvalued. Given the lack of a viable investment thesis, nonexistent positive catalysts and strong negative catalysts, we expect LTC to continue to substantially underperform the crypto market.”

Though withering, Multicoin’s view just isn’t universally shared amongst cryptocurrency analysts. Last month, CCN reported that Mati Greenspan, senior market analyst at eToro, stated that LTC is buying and selling at a “massive discount” to its basic and technical components.

Images from Shutterstock

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