Litecoin (LTC-USD) is struggling. The 20th largest cryptocurrency as ranked by Coinmarketcap.com has taken a beating ever since its recent peak at $278.01 on Nov. 13. At the time, LTC crypto had a market value of $19.2 billion. But as of Feb. 11, it was down to $125.18 and its market value had cratered to just $8.7 billion.
That represents a 45% drop in the past three months in price and market value. This makes it hard for investors to consider investing in the cryptocurrency and strains its credibility.
But the good news is that at least LTC crypto is well off of its low price of $100.70 on January 24, 2022. At Friday’s price of $125.18, it is 25% over that level. This gives some hope for depressed investors that have despaired of the crypto ever making a concerted rebound.
Where Things Stand With Litecoin
Litecoin’s future is highly correlated with Bitcoin (BTC-USD). In fact, it started as a “lighter” version of Bitcoin. Litecoin’s founder, Charlie Lee is often quoted as saying that Litecoin is the digital silver to Bitcoin as gold.
Litecoin is not likely to pull out of its slump this year until Bitcoin’s turnaround appears to be on track. Since hitting a trough price of $33,519 also on Jan. 24 along with Litecoin, it has slowly drifted up to over $42,448 as of Feb. 11. So you can see that Litecoin’s upward trajectory is highly correlated with that of Bitcoin.
Since the beginning of the year, Litecoin has slowly been making progress in creating new partnerships and implementing upgrades. For example, on Jan. 31, the Litecoin Foundation announced a “pivotal new upgrade” called Mimblewimble was launched.
Mimblewimble Extension Blockchain (MWEB)
According to CoinTelegraph online magazine, this upgrade allows privacy-oriented transactions on the network. For example, every transaction on the crypto blockchain is open to all investors and viewers to see. This new upgrade will allow certain transactions to be kept private yet still be verified as valid to each end user in the transaction.
Some consider this essential for the growth of cryptocurrency and the blockchain, especially in relation to business and personal account security. But others fear that it could spur criminal activity, including currency washing within the blockchain network.
The Mimblewimble Extension Block, also known as MWEB, allows users to opt-in as needed to conduct confidential transactions. That way large amounts of money can be transferred and kept secret.
The Foundation believes that having this key MWEB technology will allow Litecoin to be considered “sound money” in the long run. This increases its appeal as a transactional currency, store of value and for use by many more merchants.
However, privacy coins and crypto obfuscation technology like Mimblewimble have come under scrutiny in some corners. It takes away from the decentralized nature of Web 3.0 and some governments fear it could facilitate massive amounts of criminal activity.
So far Litecoin has resisted this in an attempt to make sure its currency has broad appeal around the world. After all, it is an opt-in feature, and only those who want their transactions to be concealed will have this done.
What to Do With LTC Crypto
This MWEB feature certainly makes LTC crypto stand apart from Bitcoin and other digital payments-oriented cryptos. Nevertheless, Litecoin still has a 90% correlation with Bitcoin, according to Coinmarketcap’s stat page on LTC crypto. Investopedia says that the rise and fall correlation with Bitcoin is clearly due to Litecoin’s founders’ choice for this to continue.
So, the bottom line still seems to be as goes Bitcoin, so will Litecoin, at least for the foreseeable near term. Clearly, we are in an extended “winter” period for both currencies. But over time, once blue skies appear, expect to see LTC crypto make a significant rebound as it tags along with Bitcoin.
On the date of publication, Mark R. Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.