Market news and analysis, including a miners' selloff and a gold deficit
The cryptocurrency litecoin (LTC) is a fork of the bitcoin core client created by Charlie Lee in 2011 while he was an employee at Google. Lee's current role is as managing director of the board at the Litecoin Foundation – a thankless job since open-source cryptocurrencies have a hard time funding software development. This is why ethereum conducted an ICO and why venture capitalists funded Blockstream to pay for bitcoin's open-source development.
Litecoin actually benefits from Blockstream's bitcoin research in many ways. Because it is an early core client software fork of bitcoin, it can be used to implement new bitcoin technical proposals. Segregated Witness, or SegWit, a scaling solution that changes how transaction information is stored, was first implemented on litecoin before bitcoin.
Many people have referred to litecoin as a great backup system in case bitcoin goes down – not that it's ever supposed to, but that's often a justification for owning some litecoin.
It often used to be said that litecoin is the "silver to bitcoin's gold." Here's the performance for an investor putting $10,000 into LTC on 1/1/19:
On Jan. 1, 2019, LTC was worth $32; today, it's trading around $40. So an investor would have done alright holding litecoin. In fact, the first half 2019 was a good time for litecoin – better than bitcoin for a while:
Problem is, it's possible 2019 might someday be considered the halcyon days for litecoin – mining, measured by daily average hashrate:
Hashrate fell off a cliff in latter 2019 – a sign profitability from generating new coins was not as good as it once was. So what gives?
Like bitcoin, litecoin also has a halving schedule. The most recent litecoin halving took place on Aug. 5, 2019, when the mining reward reduced from 25 LTC per block to 12.5.
Once the litecoin halving occurred, miners simply shut off their machines because many just weren't efficient enough anymore. Game over. In addition, litecoin's scrypt algorithm is only otherwise used by low liquidity, low market capitalization coins.
There's dogecoin, but its supply is so dogetastically high there's little reason to spend money mining it. There are over 123 billion dogecoin in circulation right now – there's probably some sitting in my Gmail spam folder or something.
Other cryptocurrencies using scrypt mining aren't profitable these days either because they are worth way less than Derby Turds. Yes that is a thing, real look it up – "Gorgeous nuggets of digested Kentucky bluegrass and whatever else horses eat were daringly harvested by the artist himself, fresh from the haunches of legendary 1997 Kentucky Derby winner Silver Charm at Old Friends Farm in Georgetown, Kentucky."
I wanted to bring up ol' Silver Charm the horse because I'm just not seeing litecoin the cryptocurrency as a silver charm anymore.
Charlie Lee famously announced he had sold off most of his own litecoin in December 2017 due to a "conflict of interest." I'd be real conflicted too, as litecoin hit a high of $420 on exchanges like Coinbase around that time. Again, he does still have a role with litecoin's lackadaisical foundation, but you have to wonder if its silver salad days might be coming to an end, especially now that real-life precious metals might make a run like they did after 2008.
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US, European Stocks Up but Crypto Traders Remain Cautious
While stimulus appears to be keeping markets up, longer-term troubles loom. U.S. industrial output has already taken a hit as coronavirus and government-mandated business closures hit crucial economic engines. “Pouring $6 trillion artificially creates somewhat of a ‘positive’ effect. But to me it’s like a bomb in slow motion. We will see dramatic consequences of these decisions,” said Constantin Kogan, a partner at cryptocurrency fund-of-funds BitBull Capital.
Miners Are Selling More Bitcoin Than They Are Mining
Throughout bitcoin's 81 percent recovery rally, miners sold more coins than they generated, according to the miner's rolling inventory (MRI) figure, a measure created by crypto data company ByteTree to track the changes in inventory levels held by miners. The 21-day rolling MRI stayed above 100 during the entire duration of the recent recovery from lows below $4,000. An MRI above 100 means miners are selling more than they mine and running down inventory.
Bitcoin in Rangebound Trading
Markets still look risk averse, even though globally a number of monetary and fiscal lifelines have been extended to stem the economic fallout from the coronavirus outbreak. The largest economic bill in U.S. history follows the Federal Reserve's open-ended asset purchase program and zero interest rate policy known as quantitative easing. It seems generally accepted by now that the unprecedented stimulus could bode well for bitcoin in the longer term.
Crisis May Benefit Oil, Gold, CBDCs, Not Bitcoin
Rumors abound that institutions are short on physical assets like gold. Even with bitcoin trading up among retail investors, it hasn’t translated to stronger bitcoin use among retailers. According to BlueWallet co-founder Nuno Coelho, Lightning Network payments have been steadily decreasing over the past year. Channel capacity peaked in May 2019. This may leave bitcoin languishing, stuck between niche commercial rails and a lack of large-scale users.
Gold-Backed Stablecoins Race to Keep Up With Demand
Purchases of new PAXG – which represent one ounce of London Bullion Market Association (LBMA) institutional-grade gold – have nearly doubled day-over-day since Monday, according to Paxos spokesperson Becky McClain. The firm said Thursday it has enough gold to cover current volumes. On the other hand, demand for Tether’s gold offering led the XAUT market cap to hit $50 million on Wednesday, according to data provider Nomics.
LISTEN: Mining Drop
Hosts Adam B. Levine and John Biggs talk about stimulus impacts, miners closing up shop and why estate planning is becoming a popular discussion in cryptocurrency circles.
Trend: Bitcoin's 50- and 200-day averages have produced a death cross, a long-term bearish indicator, however, exchange flows suggests the bulk of the sell-off is likely behind us.
The seven-day average of the number of transfers to exchange addresses, or unique daily exchange deposits, fell to 21,408 on Thursday to hit the lowest level since Aug. 26, 2016, according to crypto analytics firm Glassnode.
The non-price metric has collapsed by 35 percent in the last 12 days. That's because many investors moved their coins from exchanges to wallets during the recent recovery rally from $4,000 to $7,000, validating the upswing in prices.
With fewer investors looking to sell, downside could be limited. Nonetheless, a drop to $6,000 may be seen if the rising channel seen on the 4-hour chart is breached to the downside. On the higher side, a move above $7,000 is needed to revive the bullish setup.
7 Ways The Bitcoin Network Is Growing Rapidly (Decrypt) The recent price crash was bad for bitcoin and bitcoin miners. But here are seven ways the network continues to make strong progress.
How Do You Know When Bitcoin’s Ready For Blast Off? (Forbes) In the eyes of Mati Greenspan, a trader from birth, crypto is about financial literacy. It’s about putting the power of money back into the hands of the people.
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.
Lackadaisical Litecoin