Litecoin ETF: Potential for a New Boom, Will the SEC Approve Another Crypto ETF?
Litecoin (LTC) is a cryptocurrency launched in 2011 as a fork from the Bitcoin blockchain. It was originally conceived to mitigate centralization concerns associated with Bitcoin by preventing large-scale miners from dominating the mining process and ensuring a more decentralized network.
However, Litecoin has not really succeeded in its mission to curtail the miners’ control over the network. Thus, it has adapted and made a name for itself as both a mineable cryptocurrency and as a viable peer-to-peer payment system.
Over time, Litecoin has grown to be one of the prominent coins out there, for it has continued to remain decentralized with transactions and remained users’ favorite digital trusted efficient currency.
Read more: Review Litecoin (LTC) – Different Between Litecoin & Bitcoin
By 2011, Bitcoin was picking up steam, particularly among large-scale miners who were becoming appealed by its nature of high price appreciation. This would usher in a shift at the enterprise level of mining, challenging the very decentralized ethos of Bitcoin by making it hard to join in as individual miners, hence attacking the decentralization principle.
All these concerns were to be addressed when, in October 2011, another former Google engineer, Charlie Lee, came up with Litecoin. Taking inspiration from Bitcoin but keeping an eye on surmounting a few of its shortcomings, Lee pitched Litecoin as “the silver to Bitcoin’s gold.” In essence, he wanted not necessarily to replace Bitcoin but to provide a complement with unique characteristics.
A graduate of the Massachusetts Institute of Technology, Lee created Litecoin for a “lite version of Bitcoin” with the intention to provide a practical alternative rather than a direct competitor. Litecoin launched on October 13, 2011, at a time when there were very few altcoins in the cryptocurrency scene, most of which were simple forks of Bitcoin, some of them with very few changes.
Though it shared some of the problems of Bitcoin, such as price fluctuations, struggling to lure some of the more hardcore Bitcoin supporters, Litecoin rode on its reputation as “Bitcoin’s little version” and leveraged Charlie Lee’s savvy use of social media to its advantage. It helped Litecoin build a community of advocates and built its reputation for long-term potential.
Before 2014, most altcoins were designed to be copies of Bitcoin with small tweaks added. Many altcoins had block discovery times altered and reduced transaction fees, among other things. Most of these projects, even to this very day, have never managed to live above Bitcoin and have generally fallen by the wayside. Litecoin is an exception, though—issues that set it apart have been quite significant in real achievements and continuous recognition.
In April 2017, the 111 North Bridge Road Singapore Foundation began to promote Litecoin, after which it started to come into the limelight. Pretty soon, the Litecoin’s exchange rate was being featured on Bloomberg Terminal and added into Google’s currency converter tool. One high note in 2019 was when Litecoin became the official cryptocurrency of the Miami Dolphins, whereby the team allowed fans to buy game tickets using LTC.
Read more: Top 5 Best Litecoin Casinos In 2024
Litecoin was tailored to decentralize further the mining processes dominated by ASIC miners then. Litecoin implemented a hashing algorithm that favored memory use rather than processing power, all in an effort to discourage profit-driven miners who were taking hold of cryptocurrency mining then. That, however, turned out very short-lived as the very first Litecoin ASIC miners came into the market in 2014.
Despite these differences in design, Litecoin’s core is very similar to that of Bitcoin. Both are open source and utilize proof-of-work mechanisms to verify transactions. But there are some basic differences between the two cryptocurrencies:
Because it is so similar to Bitcoin, Litecoin has often served as a testing ground for new blockchain technologies. Specifically, some features were tested on Litecoin before they were implemented on Bitcoin, such as:
The Litecoin ecosystem includes all services and applications developed to better the use, and ultimately the adoption, of Litecoin. These can be generally categorized as digital wallets, cryptocurrency exchanges, and payment platforms that support transactions using Litecoins.
Unlike Ethereum, which hosts many different ERC-20 tokens, Litecoin is a standalone cryptocurrency. It doesn’t have a token system of its own within the network. Alternatively, Litecoin itself as money is used for exchange and storage. Development and adoption promotion endeavors are very active in the Litecoin community.
An ETF is a versatile investment tool that holds the best of both stocks and mutual funds. It’s a pooled security in investment that allows buying and selling shares just as they do in individual stocks, but what makes ETFs different is their ability to track all kinds of assets: commodity prices or complete portfolios of securities.
Basically, they are developed to follow different investment strategies and can be tailored in order to suit any kind of financial goal. As far as this is concerned, there exist a number of ETF types that help investors achieve different goals related to investments, such as the generation of income, capital appreciation, or speculation. Apart from that, ETFs may work strategically for the management of risk by hedging or by providing an offset for the potential losses in a portfolio to a certain extent.
The SPDR S&P 500 ETF was the first ETF intended to track the performance of the S&P 500 Index. That really opened a new frontier of investment options to investors by making available an accessible, inexpensive way of gaining exposure to every asset class.
Exchange-traded funds are investment funds traded on a stock exchange, much like an individual stock. They track specific indexes, looking to offer investors the diversified portfolio of assets that can be both sold and acquired during market hours.
The ETFs must get registered with SEC if they have to be traded in the United States. Usually, all the ETFs are open-end funds and hence, in most of the cases, they come or are governed under the Investment Company Act of 1940, with a few exceptions, under the modified rules. Open-end funds, unlike closed-end funds, do not have any restriction on the number of investors in them.
ETFs allow each investor to purchase shares of the fund itself, not the fund’s underlying securities. In contrast to mutual funds, which only calculate the value of shares once at the end of the day, the price of an ETF changes throughout the trading day and reacts to market conditions, making it possible for investors to trade accordingly. Real time with adjusted prices.
Each variety of ETF is oriented to serve a particular purpose, targeted at various investment goals and risk appetites. Here is the breakup of the major categories of ETFs:
Equity ETFs track an underlying basket of stocks. These ETFs can have their underlying basket comprising stocks belonging to large-cap or small-cap companies or even stocks belonging to companies from specific countries. Sector-oriented ETFs—targeting technology or finance segments—can also be available, depending on the trend of the current market.
Proper risk management would require diversifying one’s portfolio. One can invest in government or corporate bonds through bond or fixed-income ETFs. Compared to equity ETFs, these investment tools are much less risky and provide a steady stream of income. Conservative investors who require stability and predictable returns largely use these ETFs.
Commodity ETFs provide the easy doorway for those who want exposure to commodities, for example, gold, silver, or oil. While one can engage in the actual physical commodity investment, these ETFs need not be based on that but could follow the commodity prices through a variety of derivatives, ushering other risks—such as counterparty risks—to the mix. In relation to stocks, they afford a good way of diversification, but investors should be aware that some complexities might creep in.
Currency ETFs provide the ways for investors to get single-currency or basket exposure. These ETFs may invest in the currency directly or use various derivatives. They are especially useful for someone who believes the currency may appreciate in value, or they can be used to hedge against currency risks. However, with the use of derivatives in currency ETFs, higher risks are raised, and an investor must know the inner mechanics before investing in such a security.
Leveraged and inverse ETFs are specialty ETFs, having more concentrated ways of investing. Leveraged ETFs invest using borrowed money in an attempt to magnify returns, such as their 2X leveraged funds, which strive to double the return of the underlying index. Inverse ETFs rise in value when their target index declines, much the same as short-selling. Both can provide extreme returns but pose higher risks with additional complexities and require additional research before any investment is made.
Factor ETFs are based on factor investing—a strategy focused on the specific drivers of returns across asset classes. Often referred to as “Smart Beta,” this approach can let one zero in on such characteristics as value, momentum, or low volatility. Factor ETFs would therefore provide an investment strategy tailored accordingly. Institutional investors have a history of long-term applications of these factors for the enhancement of portfolio management.
Sustainable ETFs are taking the investment world by storm, as more and more investment managers focus on responsible investments. This incorporates the elements of ESG directly into a fund’s investment process. The role of demographics, regulatory change, and shifting perceptions of risk sets up a pathway for investors to align their portfolios with wider social and environmental objectives.
Such ETFs enable investors to invest in cryptocurrency by buying and holding the coins to be able to replicate the price movements. Investors are able to buy the fund’s shares through their regular brokerage accounts, which makes investing in crypto easier and does not require one to purchase or manage cryptocurrencies directly.
The SEC has traditionally been very wary of approving cryptocurrency ETFs, in large part because it perceives insufficient investor protection within a market that is still basically unregulated. The SEC has said it needs more stringent measures to prevent manipulation and fraud and ensure fair and transparent trading in the crypto market.
Despite these reservations, the crypto ETF landscape has since shifted. In 2021, the first crypto futures ETFs were launched; this had been a huge development at the time. In early 2024, the green light for spot Bitcoin ETFs followed through. Then, in May 2024, spot Ethereum ETFs seemed to get the nod effectively.
A spot Litecoin ETF would be the giant step toward onboarding traditional finance into the cryptocurrency sector. Investors in conventional financial markets have, for the most part, been wary of making large investments in cryptocurrencies due to lack of regulation within that industry. That would change with a government-backed seal of approval for trading in crypto.
It would increase its appeal and usability in many ways if a spot Litecoin ETF existed. For example, if more merchants began accepting LTC, then there would be much wider use for the digital plus to purchase goods and services. Even further, Litecoin may replace fiat across many platforms in various sectors.
Particularly, it will be a place where, with Litecoin integration, it would spell faster speeds, much cheaper costs, and security in online marketplaces. This attracts the seller and the purchaser alike to make further popularity of LTC in daily transactions. Litecoin ETF also benefits from casino inflows, as LTC is also a discreet money transfer method that is likely to attract many players.
Litecoin ETF launch is still a speculation, but to compare its potential with Bitcoin ETF is quite lame. Bitcoin in both its current capitalization and the futures ETFs that have been traded for many years have been a monument to the crypto industry. The Ethereum ETF alone could not surpass the Bitcoin ETF with its launch.
However, the similarities of Litecoin and Bitcoin could also be a driving force for Litecoin ETFs to achieve the same growth rate as Bitcoin if launched in the future.
Charlie Lee has been very positive about the prospects of a Litecoin ETF. Indeed, he derives his confidence from the structural similarities between Litecoin (LTC) and Bitcoin (BTC), both of which use the Proof-of-Work consensus mechanism. This makes Litecoin very favorable in terms of ETF classification, argues Lee. Moreover, it is a commodity, making Litecoin’s case for eligibility even stronger, much like what happened with Bitcoin.
While he acknowledged that the first demand for a Litecoin ETF might be significantly lower than what the hype would be surrounding a potential Bitcoin ETF, Lee sounded quite optimistic over its long-term prospects. He labeled the growing crypto industry an opportunity for Litecoin to spell out its value proposition and growth potential to investors. In case of approval, a successful Litecoin ETF can act as a catalyst to further adoption—provided regulatory approval and market reaction are positive.
Litecoin has been the third cryptocurrency by market capitalization for a very long time but has been surpassed by emerging competitors in recent years. According to the latest data, the current price of Litecoin is around $71. With the third Litecoin halving taking place on August 2, 2023, the price of LTC soared to $120 before the event but quickly dropped nearly %50 immediately after.
Therefore, whether LTC price can achieve the prospect of reaching ATH like in 2021 to the $350 mark depends entirely on the market. With the recent boost brought by crypto ETFs, LTC may soon improve its performance. Looking into the future, the $220, $300, $350 levels will be important resistance. If these milestones are surpassed, LTC price may skyrocket to $500 or even $1000 in the 2024-2028 cycle.
Looking at Bitcoin’s price, it has increased more than 300% since the race for approval by ETF issuers began mid-last year. So, with an altcoin that is a mini “clone” of Bitcoin, the Litecoin ETF could also offer similar or much more growth potential. The target price range for LTC if the Litecoin ETF is approved could be the old ATH at $350 or $500 in the future.
Being the second-oldest cryptocurrency, Litecoin has weathered so many storms on the market floor, which speaks very strongly to its existence and survival. Of course, this fact alone doesn’t give any guarantee that it will last forever. Still, this is a loud statement on its place in the crypto ecosystem.
Litecoin has a maximum supply of 84 million tokens, with some 64 million already minted and in circulation. It is this that could prop up Litecoin as a store of value for investors, further enhancing its value by virtue of its limited supply.
It offers one of the chief advantages of Litecoin: fast, secure, and cheap ways of sending money. In essence, this basically implies that users find it very attractive for sending and receiving money efficiently and effectively.
Despite the strengths, Litecoin is also threatened by other competitors. It offers an interesting investment opportunity, although perhaps the investor would like to diversify his portfolio with other cryptocurrencies to optimize the potential returns and, of course, be in a better position to handle risks adequately. Litecoin ETF could give hope to LTC to get on the right track with others, like Solana or Cardano.
While there’s no formal confirmation from any prospective issuers that a Litecoin ETF is forthcoming at this time, the general sentiment remains optimistic in this market that further cryptocurrency ETFs will be making their way through before year-end.
Like Bitcoin, Litecoin also undergoes a halving process whereby the block rewards are cut by half every four years or so. The latest Litecoin halving went live in August 2023. According to estimates, the next Litecoin halving date will fall in July 2027.
LTC price spiked before August last year to $120 thanks to the halving event but quickly declined afterward. After the launch events of Bitcoin ETFs in the US, Bitcoin halving, LTC price has not yet regained its highest level last year.
| DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing. |
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