Litecoin Crypto has a very high compounding value compared to Bitcoin

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Litecoin (CCC: LTC-USD) is the 15th largest cryptocurrency, according to Coinmarketcap.com, with a market cap of $ 10.7 billion. It is also one of the first blockchain currencies, emerging quite soon after Bitcoin (CCC: BTC-USD). Therefore, Litecoin crypto is likely to rise with Bitcoin if it starts to recover.

Source: Wit Olszewski / Shutterstock.com

So far this year, LTC tokens have grown by around 26% year-to-date (YTD). It finished last year at $ 126.23 on December 31st and on September 22nd it was at $ 159.82. Additionally, the crypto hit a high of $ 386.45 on May 8, up around 206% year-to-date.

However, most investors should have sold by then. This is because the Litecoin crypto immediately sank over several months until July 19, when it ended at $ 107.40 per LTC token. However, since then the crypto has risen 48.8% to $ 159.82.

Correlation with Bitcoin

Interestingly, this is similar to the path that Bitcoin has taken this year. At its peak, BTC rose 116% to $ 63,503 on April 12. Then it fell to its low of $ 29,807 also on July 19 (similar to Litecoin). Since then, Bitcoin has risen more than 46% to reach $ 44,600 on September 23.

As a Cointelegraph article points out, when Bitcoin rises, so do a number of “legacy” cryptos like Litecoin. Litecoin was modeled after Bitcoin, and it tends to evolve in tandem with Bitcoin.

This despite some of the differences Litecoin has with Bitcoin. The main difference is that Litecoin has a much higher supply of tokens. While Bitcoin has a supply limit of 21 million tokens, Litecoin has four times that number at 84 million.

The reason is that its founder, Charlie Lee, wanted to position Litecoin as “silver” versus Bitcoin as “gold”. According to a recent article, he said he wanted the cryptocurrency to be a ‘lite’ version of Bitcoin. So one way to do that was to dramatically increase its supply.

The net effect is that Litecoin had a similar correlation with major market movements by Bitcoin. However, the Litecoin crypto has also seen some major changes outside of Bitcoin. Here is one.

Litecoin Crypto in the news

On September 13, Litecoin investors woke up to a surprisingly new announcement from Walmart (NYSE: WMT) that the retailer was going to accept Litecoin as a payment method. LTC coins immediately rose 34%, according to online magazine Decrypt

And why not? This would have been the first announcement from a large company other than Tesla (NASDAQ: TSLA) with its once again acceptance of Bitcoin as a payment method.

The only problem is that the ad was fake news. Walmart came out later today and said it was not an authentic press release.

Nonetheless, a good thing to come out of this saga is that it shows that Litecoin is still viewed by the public as a potential means of payment. Recently, PayPal (NASDAQ: PYPL) announced that its UK customers will be able to buy and sell four major cryptocurrencies. One of the four was Litecoin. The others were Bitcoin, Bitcoin Cash (CCC: BCH-USD), and Ethereum (CCC: ETH-USD).

But it also shows that Litecoin’s correlation with Bitcoin is pretty well established. When news is announced that it is accepted exclusively (with the exception of Bitcoin) as a payment method, you can probably dismiss it as fake news.

Where that leaves investors in Litecoin Crypto

Litecoin is also increasingly accepted in the Defi and Dapp worlds. Defi stands for decentralized finance and Dapp stands for decentralized applications. I wrote about this in my last article on Litecoin.

The result for most investors from our observation that Litecoin is highly correlated with Bitcoin is that LTC is a cheaper way to achieve performance similar to Bitcoin. The fact remains that an LTC token costs roughly $ 160, while a BTC costs an astronomical $ 44,000.

So, assuming that Litecoin crypto should ultimately be priced similar to Bitcoin, given its quadruple supply differential, its price should tend towards $ 10,866 (i.e. $ 43,465 / 4 ). However, since Litecoin is not as popular, we need to reduce it significantly.

Therefore, even if we take a two-thirds discount on the comparison value of Litecoin to Bitcoin, it should still be worth $ 3,622 (i.e. $ 10,866 x (1-.6666)). This implies a potential 22-fold increase for LTC tokens.

Let’s say it takes five years for this to happen. This implies that the compound average growth rate (CAGR) will be 86.6% per year each year for the next five years. For most people, that’s a pretty good expected return on investment each year.

As of the publication date, Mark R. Hake holds a long position in Bitcoin and Ethereum but does not hold any other securities mentioned in the article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Mark Hake writes about personal finance at mrhake.medium.com and runs the Total Yield Value Guide which you can view here.

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