During the year, the cost of Litecoin increased 60 times. What is this cryptocurrency?
In January 2017, the cost of Litecoin did not exceed $ 5. In December it passed for $ 300. The competent tactics of the developer and founder of the network Charlie Lee brings him good results, and at the same time, all coin holders who believed in the prospect of investment.
Litecoin bases on the same open source code as Bitcoin, but with minor changes. “This is a global decentralized payment network, which has no control from any central authorities,” the website says. Litecoin is just an additional means of payment for bitcoin. It is often called “silver” in comparison with Bitcoin as “gold.”
In 2011, Charlie Lee, a developer of the Litecoin network, decided to create a new payment facility. It would require less time to confirm transactions and which could be obtained by all system members, not just individual miners. The main difference between the two crypto-currencies is the use of different work algorithms. While the Bitcoin network uses the SHA256 hash function, Litecoin uses scrypt — function, the speed of which depends on access to large amounts of memory. Creation of ASIC-devices for scrypt-function is much more complicated and more expensive than for SHA256. Thus, scrypt complicates the simultaneous launch of several processes on the video card. Thus, Litecoin can be profitable on a conventional video card and even on a CPU, which makes the network more decentralized.
Initially, the miners were asked to generate 50 coins per block, as well as in the case of Bitcoin. However, as to maintain the rate of inflation according to the schedule of changes, each 840,000th block becomes half as much. Therefore, the total number of coins to be extracted by the miners is 84 million units. It is four times more that of the Bitcoin network.
Today, Litecoin is the fifth-largest currency regarding market capitalization: about $ 17 billion versus $ 330 billion from Bitcoin. But this does not mean that the currency is not popular. Litecoin creator Charlie Lee is quite a public person, unlike Bitcoin anonymous developer Satoshi Nakamoto, about whom nothing is known at all. This played a big role in the development of the platform and the growing number of users. People understand why Litecoin is needed and what the developers are striving for, unlike Bitcoin. Since January 2017 the cost of LTC has jumped from $ 5 to $ 270. It is more than 50 times. At the same time, by the middle of December, the price had reached a peak value of $ 340 but stayed at this level all day. Many coin holders wondered: what is going on? Here are three reasons why the cost of Litecoin grew by 333% in just a few days.
Bitcoin price growth and futures launch
The Chicago Stock Exchange launched futures trading on Bitcoin on December 10. The rise in the price of the currency began a few days before the launch and continued after. On December 18, another exchange stock – CME – plans to launch futures trading. Analysts say that the price of Litecoin is directly proportional to the behavior of Bitcoin. Thus, the value of the first currency has significantly increased over the past two weeks. They also argue that there are two possible reasons for this dependence:
- increased activity of Bitcoin-holders and the inflow of a new audience that also ramifies on Litecoin;
- increasing commissions in the Bitcoin-network due to the loads, from which Litecoin wins at the expense of a quarter of the commission fee.
“Gold Rush” and a huge flow of users
The largest currency exchange Coinbase daily receives about 100,000 new users. Its application takes the first place by the number of downloads in the App Store. And this despite the fact that the exchange operates only with three currencies: Bitcoin, Litecoin, and Ethereum. As described above, the relationship between BTC and LTC plays a big part in this: people are rushing to the exchange in the hope of getting a profit in the future.
Buyers begin to understand what Litecoin is
As more people buy other currencies on exchanges like Coinbase with the help of BTC, the low fees and the speed of transferring funds to the Litecoin affect the network. The rapid finding of blocks in the network (2.5 minutes versus 10 for Bitcoin) is one of the main factors in choosing this cryptocurrency.
At the same time, Charlie Lee, its creator, supports Litecoin in every possible way. He is always on TV programs for comments and interviews. He does not forget about social networks, actively participating in discussions on forums and on Twitter. This increases the number of LTC Holders and the overall loyalty of the audience.
The cost of Bitcoin reached $ 20,000. A year ago it cost $ 788
The cost of cryptocurrency Bitcoin for the first time reached $ 20,000. The Coinmarketcap index evidences this. The total capitalization of the cryptocurrency was $ 335 billion.
The cost of Bitcoin began to grow actively from the end of November: then one Bitcoin cost about $ 8000 on average. A year ago, the cost of Bitcoin was $ 788.
How 1000 people control 40% of the whole market and can manipulate it
The Bitcoin rate is subject to incredible volatility. During the day it can rise by 30%, and then fall by 20%. One of the problems that adds the cost of unpredictability cryptocurrency is the owners of large amounts of Bitcoin. They are often called whales. They can take a course in peak, selling even a small fraction of their fortune. Such interventions became even more probable when the value of the cryptocurrency increased 15 times since the beginning of 2017.
About 40% of all Bitcoins belong to 1000 users. At current prices, each of them may want to sell about half the state, says Aaron Brown, former managing director of AQR Capital Management, Bloomberg. Moreover, whales can coordinate transactions or report them to the circle of the elect. Many of the large owners of Bitcoin had known each other for years and believed in cryptocurrency in the early years when the majority only ridiculed it. Therefore, whales can potentially negotiate to crash or raise the market.
Regulators react very slowly to the development of the situation on the crypto-currency market, so many of the existing rules are still blurred. If traders not only raise the price but will spread rumors online, this can be considered fraud. The Bittrex exchange recently warned users that their accounts could be blocked if they conspire to manipulate the price. For other cryptocurrency, laws may be different. Depending on how the altcoins are structured, and how investors plan to make money for them, some can be regarded as real currencies, the US Securities Commission says.
The recent rise in the price of Bitcoin is difficult to explain because the cryptocurrency has no intrinsic value. Launched in 2009 thanks to the work of an anonymous engineer, this is a form of digital payment that supports an independent network of computers. Cryptographic algorithms are used to confirm transactions. The most loyal fans say that cryptocurrency can replace banks and traditional money. But it costs exactly as much as someone will pay for it. This makes her a victim of sudden shifts in price.
Some argue that the situation is no different from the one that has developed in established markets. “A good comparison could be the investment in shares of young companies. Their founders and some investors own most of the assets, “says Paul of BlockTower. Other investors are confident that whales will not merge their assets because they believe in the long-term potential of the cryptocurrency. “It’s perfectly reasonable to think that whales who own so many Bitcoins and Bitcoin cache do not want to destroy each other,” said trader Sebastian Kinsman. But when prices soar to the skies, the calculation may change.