Litecoin is enjoying a nice pump as its price hits nearly $75, a level last seen in late July this year. With that, LTC/USD is now up 46% from its early August low of $49.50. As of writing, Litecoin is trading at $73.26, recording a positive performance of 12.5% this week.
These latest gains for Litecoin came after asset manager Canary Capital filed for a spot Litecoin exchange-traded fund (ETF). Currently, Bitcoin and Ethereum are the only two cryptocurrencies with a spot ETF, and a possible Litecoin ETF has created some anticipation and speculation around the crypto asset.
It was earlier this week, on October 15th, that Canary Capital submitted an S-1 filing to the US Securities and Exchange Commission (SEC) in an attempt to secure approval for a spot Litecoin ETF, which would directly hold LTC.
The S-1 document is a requirement for those seeking to issue new security and be listed on a public stock exchange. It is one of two filings required to launch an ETF.
Unless the filing is followed by the 19b-4 filing, which signals a rule change at the stock exchange where the fund would trade once it gets approval and is listed, the S-1 filing is meaningless.
For now, this is the first of its kind application in the US, and no other asset manager has ventured into this asset. During this year, we saw many non-native ETF issuers launching their own crypto funds; it’s the first one tied to Litecoin.
“If approved, the ETF will provide both consumer and institutional investors with wide-spread direct exposure to #Litecoin.”
– Litecoin Foundation posted on X (previously Twitter)
Litecoin isn’t the extent of Canary Capital’s ambitions either. The new crypto-focused investment company, which was founded by Steven McClurg, the co-founder of Valkyrie Funds, has also filed for a spot in XRP ETF.
Canary’s S-1 for a proposed spot XRP ETF on October 9th came just days after Bitwise sought to register a similar ETF with the SEC. XRP, from Ripple, was launched in 2012, and in 2020, it was in the middle of a lawsuit filed by the SEC, alleging the token launch to be an unregistered securities offering.
This was just one of over a hundred regulatory actions taken by the SEC against the crypto industry. Under the current Presidency of Joe Biden, the agency has been clamping down on crypto aggressively.
According to Galaxy Research’s recent report, US Vice President and Democrat presidential candidate Kamala Harris is friendlier toward crypto than Biden but not as pro-industry as former President Donald Trump, who’s the Republican candidate for president. In July, Trump promised to “fire” current SEC Chairman Gary Gensler. Harris has also begun to show some support for crypto in recent months, including listing blockchain technology among the sectors where she wants the US to “remain dominant.”
Canary has filed for XRP and Litecoin ETFs within the same month. With that, the asset manager has a total of two ETFs that it plans to launch, but no ticker or management fee has been disclosed for these potential funds yet.
If the ETF gets approved, the introduction of a spot Litecoin ETF could see a surge in institutional capital in LTC, potentially pushing the Litecoin price higher. However, for now, this remains very far-fetched, as there’s no certainty it will get approved. Even if it gets the green light, it doesn’t guarantee a nice pump for LTC. It’s all speculation at this point.
One reason for this is that Canary Capital is completely new to the ETF space. The one-month-old firm lacks a track record in managing large-scale investment products. Another prominent reason is the underwhelming performance of Ethereum ETFs.
Bitcoin and Ethereum ETF Performance
In January, the SEC gave a green light to Bitcoin Spot ETFs, which led to a frenzy of institutional capital flowing into the market.
Together, the 12 ETFs now have $20.66 billion in cumulative total net inflow, with their total net assets being just above $64 billion, 4.84% of Bitcoin’s market cap, according to SoSo Value. Among these products, BlackRock’s IBIT is the clear winner, with $22.77 bln in net inflows and $25.79 bln in net assets.
The 9 Ethereum ETFs, on the other hand, have had negative $481.90 million in cumulative total net inflow since their listing, while total net assets are at $7.18 bln, representing 2.30% of Ethereum’s market cap.
This is despite BlackRock’s ETHA pulling in $1.26 bln in net inflows, placing it in the lead with $1.12 bln in net assets. The reason for this is Grayscale, which has seen $3.01 bln in outflows from ETHE so far. However, it still has $4.20 bln in net assets, meaning it’ll take some time before Ethereum starts to see the effect of inflows.
Grayscale has been the biggest loser due to its high fees, which also affected its Bitcoin fund. GBTC has recorded $20.10 bln in outflows and now only holds $14.75 bln in net assets. The asset manager also has a Litecoin Fund (LTCN) with an AUM of $139 million.
While Graysacle hasn’t filed to convert its Litecoin fund into an ETF, it is seeking SEC approval to convert its multi-asset fund into a spot ETF. The Grayscale Digital Large Cap Fund (GDLC) covers Bitcoin, Ethereum, Solana, XRP, and Avalanche.
Now, if we look at the price performance of these assets, Bitcoin first started pumping in anticipation of the ETF in Q3 of last year. From trading just under $27,000 at the beginning of Oct. 2023, it jumped past $49,000 in early January this year.
After a 21.8% dip in less than two weeks, BTC/USD went on to hit a new all-time high (ATH) at around $73,740 in mid-March. Since then, the largest cryptocurrency by market cap of $1.34 trillion has gone through several ups and downs. Now, after seven months of chop, the market is expecting BTC to retake its ATH.
As of writing, BTC/USD is trading above $68,000, up over 45.5% YTD and 335% from its Nov. 2022 low. At its current price, Bitcoin has also been up 141% in the past year and is now only 7.2% away from its peak.
When it comes to Ethereum, it is currently trading at $2,640, up 66.5% in the past year but still down 46% from its ATH of $4,880 hit in Nov. 2021. So, despite getting an ETF, the second-largest cryptocurrency with a market cap of $316 billion has yet to hit a new high this year.
In fact, ETH was trading around $3,500 when its ETF started trading on July 23rd, and now, even nearly three months later, the price is still down more than 25%. As from the June 2022 lows, when ETH price went under $900, its price is up about 200%.
Against BTC, ETH’s performance, however, has been extremely poor, with ETHBTC continuing to hit fresh lows, currently at 0.03875. ETHBTC has been on a downtrend since Dec. 2021.
While Litecoin, much like Bitcoin, has had its ups and downs this year, its performance has been even more subdued than Ether. For its yearly high in March-end 2024, LTC price only managed to hit $112.50, last seen in July 2023. In fact, LTC’s recent low below $50 has been around the same level as in Nov. 2022, which marked the bottom of this cycle’s bear market.
The year-to-date gains of LTC are barely in the green, while the one-year return is 19%. Also, LTC is still 82.2% away from its all-time high of $410.26 hit in May 2021, which was just around its 2018 peak of about $420.
This extremely weak performance of the 26th largest crypto with a market cap of $5.4 bln doesn’t paint a bullish picture for Litecoin, but it’s still possible that a potential ETF may create demand for the asset in anticipation of an institutional adoption.
For that, we’ll now take a look at what exactly Litecoin is and what it can really offer to institutional investors that they can’t already get with Bitcoin or Ethereum.
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A Look at Litecoin and its History
Litecoin is an alternative cryptocurrency (altcoin) that was created a few years after Bitcoin in 2011. MIT graduate and former Google engineer Charles’ Charlie’ Lee was behind the coin, for which he used Bitcoin’s open-source code but made some modifications to it. During the 2017 peak, Lee sold all his Litecoin holdings, a decision that received mixed reactions within the community.
Launched as a fork of Bitcoin and being similar in nature, when the Segwit (Segregated Witness) upgrade was proposed in 2015 to make Bitcoin scalable, Litecoin acted as a testing ground for SegWit’s viability on the larger network. Much like how Litecoin was the first one to adopt the SegWit upgrade in 2017 and successfully test it, Litecoin implemented another scalability-enhancing innovation, the L2 Lightning Network, in 2018.
So, created as a ‘lite version of Bitcoin,’ Litecoin shares many features with Bitcoin, including being an open-source global payment network not controlled by a central authority.
Also, much like Bitcoin miners solve complex mathematical problems, Litecoin miners do the same, but they use the Scrypt hashing algorithm. While derived from Bitcoin’s original code, Litecoin has many differences; it was actually built to improve upon Bitcoin’s shortcomings, such as slow speed and high fees.
To fulfill that purpose, Litecoin generates one new block every two and a half minutes compared to Bitcoin’s 10-minute block production, which makes it four times faster than Bitcoin. Also, while Bitcoin has a fixed supply of 21 million, Litecoin has a maximum circulating supply of 84 million, which again is 4x of Bitcoin.
The hash rate of Litecoin is currently on a constant incline, hitting a new high at 1.26 Phash/s this week, as per Bitinfocharts. The hash rate is the computational power being used to mine and process transactions on a blockchain.
Meanwhile, the current average transaction fee on Litecoin is $0.004, which is significantly cheaper than Bitcoin’s $6.33. With that, the number of transactions recorded on this blockchain in the past 24 hours was more than 200,000. In the entire 2024, Litecoin has processed over 77 million transactions.
Data from BitPay suggests that LTC is actually the top choice for making transactions, accounting for 37% of all crypto payments. In contrast, Bitcoin’s share is only 25.8% of the total transaction, while Ehereum’s is at 10.23%. This makes sense, given that Litecoin allows users and businesses to make fast payments at considerably low prices.
Leveraging fast transaction times and low fees, Litecoin is being widely used for peer-to-peer payments, allowing users to transfer value directly between each other fast and without the need for intermediaries. The merchant adoption of LTC has also increased over the years across industries such as Travala, Sheetz, RE/MAX, and eGifter. Even PayPal supports LTC as part of its crypto expansion.
Amidst all this, Litecoin has been working on a privacy protocol called MimbleWimble that encrypts information. The MimbleWimble Extension Blocks (MWEB) upgrade was officially launched in 2022. The following year, Litecoin had its third halving event, which reduced its block reward from 12.5 LTC to 6.25 LTC.
Initially a strong competitor to Bitcoin, over time, as more cryptocurrencies came in, Litecoin’s popularity substantially decreased. Today, layer 2s, prediction markets, meme coins, and AI coins are leading the narrative.
But what certainly works in Litecoin’s favor is that for the past 13 years, it has been operating with zero downtime, which makes it a reliable and secure digital asset.
Often referred to as the “silver to Bitcoin’s gold,” Litecoin has not only maintained its relevance but captured regulatory clarity, which is a strong point. In April 2024, in a lawsuit against cryptocurrency exchange KuCoin, the Commodity Futures Trading Commission (CFTC) classified Litecoin as a commodity.
The agency only mentioned Bitcoin, Ether, and Litecoin as commodities in its complaint against KuCoin. Prior to that, in May 2023, the CFTC had mentioned the same thing in its case against another crypto exchange, Bitfinex, and its sister company, Tether, where it mentioned BTC, ETH, USDT, and LTC as commodities.
This regulatory clarity, by putting Litecoin in the same commodity category as Bitcoin and Ethereum—both of which already have their ETFs—certainly increases LTC’s chances of getting ETF approval. However, it should be noted it’s the SEC, not the CFTC, that must give the ETF the green light.
Click here to learn about investing in Litecoin (LTC).
What’s Ahead? The Broad Crypto Market Trend
When it comes to the approval of Litecoin ETF, at this point, it’s anyone’s guess what could happen. However, investors and traders are certainly excited, as evidenced by the rising volume.
As crypto data provider Santiment noted in a post on X, “Litecoin is enjoying a nice mini-run,” with its on-chain transaction volume rising to nearly $4 billion in a single day. It added:
“A rise in LTC retail interest, as a result of continued development and initiatives from the OG network.”
Besides volume, open interest (OI) is also increasing. In the past 24 hours, Litecoin OI jumped over 5% to $282.7 million, though it’s still far from the 2024 peak of $636.81 million on March 31st, as per CoinGlass. Binance accounts for 35.75% of the total OI, followed by Bybit at 29.3% and OKX at 15.89%.
So, what’s ahead for LTC? Well, that depends on Bitcoin, as the crypto king primarily decides the direction the broad market takes.
For starters, Bitcoin is already pointing to a green October, which is historically a bullish month, averaging 21.57% returns. After recording 7.29% gains to post its most bullish September ever, Bitcoin has started this new quarter with 6.96% returns so far. Rising BTC prices have led Bitcoin’s dominance to increase to 53.6%, which was last seen in April 2021.
Amidst this, 76% of Asia-based family offices and high-net-worth individuals are investing in crypto, while another 16% are planning to do so in the future, as per a report by Aspen Digital. Diversification, inflation hedge, and higher returns are being cited as primary drivers of investment not just in Asia-based investors but around the world.
With the overhang of supply issues from MT. Gox repayments and sales of seized bitcoin by regulatory authorities in the US and Germany resolved, combined with the Federal Reserve cutting rates by 50 basis points, the market is bullish on prices in the coming months. Polymarket bettors are giving a 73% chance that BTC will hit a new ATH before this year is over, potentially touching $70,000 in October.
However, higher prices mean some profit-taking should be expected along the way. Data from Glassnode shows that currently, only 5% of BTC’s circulating supply is at a loss, and historically, whenever the percentage of supply in profit surpasses 94%, BTC encounters selling pressure. Additionally, the DXY index continues to climb higher, presenting another bearish scenario.
Not to mention, the US presidential election early next month is the biggest event that has investors bracing for volatility.
That’s just par for the course for BTC, though. Corrections are to be expected on its journey to new heights. However, the broad bullish trend remains clear, and the market is gearing up for a massive bull market rally, which could send the prices of altcoins like LTC higher. And if the Litecoin Spot ETF gets approved, these coins could go on to hit new ATHs in the coming year.
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