May 11, 2021

How to Invest in Litecoin

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Should you invest in Litecoin? These 3 will make you want to invest ASAP. Plus, find out how to buy it, where to store it, and how it compares to Bitcoin.

The cryptocurrency market continues to skyrocket, with much of the spotlight staying on Bitcoin.

Looking for an alternative? Litecoin could be the answer.

Below, learn about Litecoin's unique features, how it's different from Bitcoin, and why you'd want to invest in it over other cryptocurrencies. Finally, find out the best places to buy Litecoin and where to store it.

What Is Litecoin?

Litecoin is one of the earliest Bitcoin spinoffs or "altcoins". It's actually a fork from Bitcoin's main source code. Litecoin was created in 2011, 2 years after Bitcoin, and today it is the 9th largest cryptocurrency by market cap.

Since its creation, Litecoin has been one of the only coins to remain in the top 10 largest market capitalization projects - an impressive feat for such a volatile asset class.

Litecoin is commonly referred to as "the silver to Bitcoin's gold" - but there are a few other important things to be aware of when considering these two major cryptocurrencies. Let's take a deeper look at the similarities and differences between Litecoin and Bitcoin.

Litecoin vs. Bitcoin

Litecoin and Bitcoin share many of the same features. Charlie Lee - the ex-Google engineer who launched Litecoin back in 2011 - wanted to keep the best features of Bitcoin while improving some other qualities of the cryptocurrency.

Similarities Between Litecoin & Bitcoin
The most obvious similarity between Bitcoin and Litecoin is that each is a decentralized currency with a limited supply.

This means that, unlike fiat currency, the supply cannot be arbitrarily increased or inflated.

For this reason, Bitcoin and Litecoin are often compared to silver and gold. These asset classes attract investors looking to hedge against inflation.

Litecoin and Bitcoin are also both "proof of work" protocols. Proof of work, or POW, is a popular term in the cryptocurrency world. POW is essentially a security protocol that prevents anyone from gaming the system.

It facilitates decentralized, peer-to-peer transactions while also preventing "bad actors" from overtaking the network.

POW protocols also make hacking a crypto network too resource-heavy to be feasible, which is one reason neither Litecoin nor Bitcoin has ever been hacked.

Differences Between Litecoin & Bitcoin
First, Litecoin's transaction speed is significantly faster than Bitcoin's. Bitcoin transactions take roughly 10 minutes, while Litecoin generates blocks in 2.5 minutes.

This means a Litecoin transaction usually settles in ΒΌ of the time a Bitcoin transaction would take.

Transaction speed is important because it determines how "use-able" a cryptocurrency is in the real world. For example, imagine going to pay for lunch with a debit card and having the transaction take 10 minutes - not very practical, right?

Litecoin was also designed to have lower transaction fees than Bitcoin.

Litecoin fees have averaged significantly less than $1, while Bitcoin's have often been $10+ and even gone as high as $30+.[1]

3 Reasons Why You Should Invest in Litecoin

So why would an investor choose to invest in Litecoin? There are three majorly bullish points working in Litecoin's favor this market cycle:

  1. PayPal & Crypto Merchant Payments
    PayPal recently announced that it will allow its U.S. customers to pay their favorite merchants in cryptocurrency.

    PayPal is the world's biggest online payment system, and currently lets users buy Bitcoin, Litecoin, Bitcoin Cash, and Ethereum.

    This news is likely to cause a wave of new interest in these four cryptocurrencies. However, it bodes particularly well for Litecoin.

    Why? Since it's the cheapest coin of the four, has fast transaction times and low fees, many users will likely opt to buy and pay merchants in Litecoin.

  2. P2P Payments Is a Massive Total Addressable Market
    The cryptocurrency market, and Bitcoin in particular, is often compared to the market cap of gold ($10 trillion).

    However, the P2P/Cash market is about 10x larger ($100 trillion).

    Since Litecoin is cheaper, faster, has lower transaction fees, and is used for more transactions than Bitcoin, many people think it has a big shot at this $100 trillion market cap enterprise.

    Meanwhile, Bitcoin, if it is truly "digital gold," may be capped at a $10 trillion total addressable market.

  3. Lower Market Cap = Bigger Upside Potential
    Finally, Bitcoin is currently at a $1.15 trillion market cap.[2] This means that $1.15 trillion more would have to flow into Bitcoin alone to double your investment today.

    To put it bluntly, that's a lot of money.

    On the other hand, Litecoin sits at a market cap of just over $11.5 billion, meaning only $11.5 billion of inflows would double Litecoin's price.

    It takes significantly less new capital for Litecoin to double or even quadruple in price, compared to the amount of new invested capital Bitcoin would need.

    This is why, as crypto bull markets progress, money flows further out onto the risk curve into lower market cap coins.

    Investors who are a bit late to the party realize their gains will be limited with Bitcoin and speculate into lower cap altcoins like Litecoin to have a shot at significant gains.

    This time period later in the bull run is commonly called "alt season" or "altcoin season."

How to Invest in Litecoin

Are you ready to invest in Litecoin?

Popular platforms like PayPal and Robinhood will let you invest, but the downside is that you can't transfer your cryptocurrency off of these platforms yet.

For this reason, we recommend investing in Litecoin on:

Coinbase - Coinbase is the world's largest cryptocurrency exchange. Investing is fast and easy, but fees can sometimes be high.

If you're just getting into the crypto game, consider Coinbase to test the waters and build confidence in trading. The higher fees may be a fair price to pay for the user-friendliness and ease of use.

Read more: Coinbase Review

Binance - Many users like that Binance has lower fees than Coinbase. Plus, for non-U.S. traders, Binance offers over 500 coins, making it an obvious choice for international users.

U.S. users get roughly the same number of coins on Binance as they do on Coinbase (52 vs 51, respectively). Still, it's a good option for beginners and their customer service is highly praised.

Kraken - Kraken also has lower fees than Coinbase, but slightly higher than Binance.

They offer access to a large variety of cryptocurrencies. However, Kraken's user interface is our least favorite of these four options.

Since it's not as easy to use as Coinbase or Binance, it's better suited for more experienced traders.

Read more: Kraken Review

BlockFi - BlockFi has the smallest crypto selection out of all of these; it's actually more like a bank than just a crypto exchange. But you can earn a juicy 6.5% yield in your BlockFi account.

If you're comfortable with crypto and are interested in using your holdings for a bank account or loan, BlockFi is worth checking out.

Read more: BlockFi Review

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Where to Store Your Litecoin

After purchasing your Litecoin from an exchange, it's time to decide how you want to store it.

Many users simply leave their cryptocurrency on the exchanges. The upside with that strategy is that if you want to take profits, this makes selling your crypto very fast and easy.

However, if you're in this for the long haul, we recommend storing your Litecoin in a wallet, or on an interest-earning account like BlockFi offers. Here's why:

  1. Wallets are usually more secure than exchanges. Exchanges can be (and have been) hacked.

  2. You are in control of your own crypto - you never have to withdraw it from a third-party platform to access it. (A big plus since many exchanges charge withdrawal fees).

  3. You still have options to suit your needs. You can download popular wallets like the Atomic Wallet or Celsius Wallet, or even keep your Litecoin in "cold" storage (the most secure of all) with a Ledger Wallet.

With an interest-earning account like BlockFi, compound interest can make a big impact on your investment gains.

A yield of 6.5% is only slightly below the stock market's average return of 8-10%, and that yield on your Litecoin doesn't even factor in the capital appreciation you're likely to earn as the price increases over the years.

Bottom Line

Because of its low fees and potential for gains, Litecoin is a promising altcoin investment. Since it's been around longer than newer coins and benefits from quick transaction times, it's also seen as a more stable choice. However, as with any investment, all risks must be considered before investing.

References

  1. ^ "Bitcoin Average Transaction Fee": YCharts, 2021.
  2. ^ "Bitcoin": CoinMarketCap, 2021.

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