Like a number of different cryptocurrencies, Litecoin (CCC:LTC-USD) has some spectacular, very helpful attributes. But additionally like most different cryptocurrencies, Litecoin doesn’t look well-positioned to beat the big hurdles that the asset class faces.
Supply: Wit Olszewski / Shutterstock.com
Moreover, Litecoin’s constructive points will probably be offset by an vital weak point. Given these factors, I urge longer-term buyers to promote the cryptocurrency.
As a number of reporters and different pundits have identified, Litecoin does have some substantial deserves.
In previous columns, I’ve identified a number of the issues that cryptocurrencies face. Most significantly, governments and huge banks seem like against cryptocurrencies, as proven, for instance, by the detrimental feedback by Treasury Secretary Janet Yellen about the asset class.
And governments can take vital steps to fight the efficacy of cryptocurrencies. Notably, the IRS has made each cryptocurrency transaction topic to capital positive factors taxes, and the Division of Justice recently recovered about half of the Bitcoin-denominated ransom paid to the perpetrators of the cyberattack on Colonial Pipeline. With the latter motion, the federal government confirmed that cryptos will not be as inaccessible to regulators as many had believed, undermining the belief of buyers and customers in them.
Like many others, I imagine that governments and huge banks will take extra steps to undermine cryptocurrencies. I wouldn’t even be shocked if the U.S. authorities and plenty of different Western democracies successfully ban or partially ban cryptos sooner or later, citing their use by criminals.
Whereas a number of giant firms, together with PayPal (NASDAQ:PYPL), Expedia (NASDAQ:EXPE) and Starbucks (NASDAQ:SBUX) accept Bitcoin as a method of payment, far fewer firms settle for Litecoin, with PayPal as one of many solely notable firms supporting it. So even when cryptos do survive and thrive, Litecoin shall be at a significant drawback to the primary movers within the sector, Bitcoin and Ethereum (ETH-USD). As I identified in earlier columns on Ethereum, various giant establishments are using it.
The Withdrawal of Authorities Stimulus
Transferring again to developments which can be prone to harm all cryptocurrencies, I imagine that there’s a direct correlation between stimulus from Congress, the inventory market, the Federal Reserve and the costs of cryptocurrencies.
Take into account that the last huge boom of cryptocurrencies occurred in 2017. Doubtless not coincidentally, in the identical 12 months a large tax reduce was signed into legislation and the stock market rallied tremendously. With many individuals feeling a lot richer on account of the inventory growth and believing they had been about to have extra disposable earnings on account of the tax reduce, crypto costs jumped. Because the wealth impact pale, nonetheless, the crypto bubble popped in 2018.
Quick ahead to 2021. Congress, the Fed, and the inventory market have mixed to place an excessive amount of additional disposable earnings in Individuals’ financial institution accounts. It’s fairly affordable to imagine that, because the stimulus is withdrawn and the inventory market decelerates, cryptos will tumble once more.
Including to cryptos’ energy earlier this 12 months, Individuals had saved an excessive amount of cash by not commuting to work and by enormously curbing their indoor leisure actions outdoors their properties.
The Backside Line on Litecoin
I imagine that we’re seeing the start of the results of the unwinding of all of those developments on all cryptos, together with Litecoin. Within the month that ended on June 11, for instance, Litecoin tumbled from round $377 per U.S. greenback to simply $165 per U.S. greenback.
Along with the various hurdles that every one cryptos face, Litecoin has to fight the appreciable first-user benefit of Bitcoin and Ethereum. Consequently, I like to recommend that buyers promote their Litecoin holdings.
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On the date of publication, Larry Ramer didn’t have (both immediately or not directly) any positions within the securities talked about on this article.
Larry has performed analysis and written articles on U.S. shares for 14 years. He has been employed by The Fly and Israel’s largest enterprise newspaper, Globes. Amongst his extremely profitable contrarian picks have been photo voltaic shares, Roku, Plug Energy and Snap. You possibly can attain him on StockTwits at @larryramer. Larry started writing columns for InvestorPlace in 2015.