After an abysmal year in 2022, the cryptocurrency market may be poised to make a resurgence this year. As more favourable macroeconomic environments seem to be the theme of this year, with subsiding inflation and loosening monetary policy, all major tokens, including Bitcoin and Ethereum, have notched to the upside since the beginning of 2023.
Although crypto enthusiasts like to hail Bitcoin as the preeminent token, they often fail to consider the potential offered by other more technologically advanced Bitcoin siblings, especially Litecoin. Stretching back to Bitcoin’s last year trough in November, the coin’s value has jumped 50% since then. While the gain is impressive, Litecoin’s value has also skyrocketed, with prices growing a staggering 104% from its steepest slump in November.
So, what exactly is Litecoin?
The Advent of Litecoin came about in 2011, two years after Bitcoin’s creation, when it was created by a former Google engineer named Charlie Lee. The cryptocurrency was born from a fork, an event in which participants make changes to a blockchain’s protocol resulting in a second completely segregated blockchain. Litecoin’s underlying blockchain was derived from Bitcoin’s, initially aiming to provide a more decentralized mining environment, as enterprises dominated large-scale Bitcoin mining. However, the endeavour failed to take its course when miners adapted to Litecoin’s new encryption method.
Since Litecoin’s ecosystem traces its roots back to Bitcoin’s blockchain, it shares some of the characteristics with those of the largest digital token, particularly a concept named “proof-of-work.” In essence, proof-of-work is a procedure whereby miners can validate transactions in the blockchain by solving mathematical problems. Miners with the most computational power will be the first to crack the complex math problems, earning them a certain amount of Litecoin in return.
But the question then is:
Why would you invest in Litecoin?
Though Bitcoin still holds the tenure as the king of crypto, Litecoin was originally meant to be an alternative option to the coin. According to Charlie Lee, the token’s mantra was to be a “lite version of Bitcoin” and “a coin that is the silver to Bitcoin’s gold.” To that end, here are some of Litecoin’s similarities and differences to Bitcoin that could make it an attractive investment.
A decentralized payment system
Litecoin aims to serve as a medium for global transactions. The token’s open-source payment network is decentralized and not governed but one single entity – like fiat currencies controlled by central banks. This protocol helps shield the coin from the pitfall of a single point of control. For example, during the Great Recession in 2007-2009, the financial system was on the brink of collapse when an obscene amount of money was concentrated in a small group of financial institutions, particularly banks and mortgage lenders. When the housing industry unravelled, it dragged everyone down with it, as result. The decentralized mechanism potentially allows Litecoin to become a worldwide medium of exchange while preventing itself from having a similar fiasco.
The scarcity of supply
Just like Bitcoin, Litecoin’s maximum supply is also restricted, with a cap of 84 million coins. Basic economics 101 will tell you that a limited supply will lead to a higher price. As more investors pour money into the cryptocurrency while the supply stays fixed, this creates inflationary pressure on the coin’s price. Furthermore, to ensure that the supply remains scarce and the coin’s value is preserved over time, Litecoin employs a procedure called halving. That is, at each halving event, it becomes progressively more challenging to mint new tokens, restricting the circulation of new Litecoins entering the market.
A favourable macroeconomic backdrop
The reason why crypto had such a catastrophic year in 2022 was because of rampant inflation and rising interest rates. Even though those macro forces still persist, economists expect inflation to ease precipitously and interest rates to fall in 2023, potentially creating a booming environment for cryptocurrency. As well, when the monetary policy turns more accommodative (low-interest expenses), Litecoin can reasonably anticipate more investors willing to inject capital that has been on the sideline into its system, pumping up the price. Now that you understand some of the advantageous elements of the token.
How do you invest in Litecoin?
Introducing HiRiBi, a leading cryptocurrency exchange that specializes in converting digital tokens into PayPal dollars. The platform operates on an advanced algorithm, ensuring that it can provide the most competitive exchange rate in the market. Additionally, HiRiBi offers a secure, private, and convenient method for converting Litecoin into USD, which will be promptly transferred to your PayPal wallet. With HiRiBi, you will have access to a fast and secure means of trading cryptocurrency. If you are seeking to invest in Litecoin, why not give HiRiBi a try?
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