Altcoins
Why does Litecoin follow Bitcoin?
The market price of Litecoin follows that of Bitcoin, but on a much smaller scale. This is because its market price is a function of market sentiments, economic factors, risk tolerance, investor and trader preferences, media hype, news and other factors influencing investment prices.
Litecoin is not as popular as Bitcoin, probably because it has not received the same attention as the older cryptocurrency. However, it remains in the top 20 most traded cryptocurrencies in terms of 24-hour volume. As the second oldest cryptocurrency, this is significant as it demonstrates that it still attracts the interest of many investors. Here’s why Litecoin has held up almost as long as Bitcoin and why it tends to follow its price.
Key takeaways
- Litecoin was one of the first “altcoins” to take inspiration from the original open source code of Bitcoin to create a new cryptocurrency, which is still active today.
- Since Bitcoin remains the leading cryptocurrency, other major altcoins such as Litecoin tend to follow its price trends.
- The creator of Litecoin, along with other followers, have called Litecoin the silver to Bitcoin’s gold.
Litecoin is derived from Bitcoin
Litecoin is a fork Bitcoin, created in 2011 according to its developer, Charlie Lee, decided that Bitcoin needed several improvements. He also believed he needed a cryptocurrency that complemented his use case, similar to currencies used in the past. Litecoin was therefore created for the same purpose as Bitcoin, to be a means of payment, but which could be used with Bitcoin.
The concept of “..a silver for Bitcoin gold” has been (and is) often cited, referring to how silver and gold were used as currencies in the past. One was more precious and rarer than the other (gold), so it made sense to make smaller transactions in the less valuable and a more abundant one (money). Lee intended for Litecoin to be used in the same way that silver and other metals complemented gold.
A fork of Bitcoin created a cryptocurrency with much of the coding remaining the same. Some adjustments were made to the total number of coins that would be made available, the speed at which they would be introduced, and how they would be mined to ensure that Litecoin would not compete directly with Bitcoin.
Why Litecoin Follows Bitcoin Price
As Litecoin matured, it followed in the footsteps of Bitcoin, becoming adopted as an investment and speculation opportunity. Investors and traders began treating it the only way they knew how: as a possible way to generate returns or profit from price fluctuations.
Treatment of investors
Feeling And strategies commodities and stock markets transferred to the cryptocurrency market. Each crypto then generated a base of investors and users, whose popularity increased or decreased. Bitcoin has become the favorite of speculative investors, and Litecoin has fallen further down the ladder. However, like other altcoins, it was still traded similarly to Bitcoin.
It makes sense that the market price of Litecoin follows that of Bitcoin, even though logarithmically. Indeed, the price of Bitcoin is so high that the differences are much more pronounced. When the price of Bitcoin rises, the price of Litecoin somewhat imitates it, just like other cryptocurrencies.
Commercial view
Price influencers
Supply and demand could be the most important influencing factors on Litecoin prices, similar to Bitcoin. Bitcoin supply is limited to 21 million; Litecoin has a maximum supply of 84 million, four times that of Bitcoin. Litecoin is also on a delayed halving schedule compared to Bitcoin because it was released two years later.
Litecoin halves its rewards every four years, like Bitcoin does. Bitcoin suffered its last halving in April 2024, reducing its reward to 3.125 BTC per block. Litecoin will undergo its next halving event in 2027, reducing its reward to 3.125 LTC per block; However, there will be more LTC left after its next halving than Bitcoin during its last event.
Many investors want to acquire as many Bitcoins as possible as the rate of release of new coins of the cryptocurrency slows down. Litecoin is not yet as much of a concern for investors because new bitcoins can still be acquired. How long this will last is anyone’s guess, but there may come a time when investors will look to other cryptocurrencies for returns and profits.
Is LItecoin related to Bitcoin?
Litecoin is a fork of Bitcoin and has been used in the past as a sort of test bed for improvements. It also tracks Bitcoin price movements on a much smaller scale, but it is not tied to Bitcoin.
Which Altcoins Follow Bitcoin?
Many altcoin prices follow those of Bitcoin because it is the cryptocurrency that sets the standard and pace. Litecoin, Ether, Dogecoin and many others have trends that mimic Bitcoin.
Is Litecoin a clone of Bitcoin?
In a sense, yes. It is a hard fork that was redesigned to complement Bitcoin as an additional, less valuable and more abundant currency.
The essential
Litecoin follows Bitcoin price trends as it is primarily treated as an investment and tradable commodity. Although its trends somewhat mimic those of Bitcoin, its market price is much lower because investors do not place as high a value on it.
Comments, opinions and analyzes expressed on Investopedia are for informational purposes only. Read our warranty and exclusion of liability for more information. As of the writing of this article, the author owns BTC and LTC.