If traders ditched Litecoin why are investors hoarding LTC?

Regarding the price, Litecoin (LTC) has had a pretty rough year and currently the altcoin is down 51% in the last twelve months. The lack of activity on GitHub and planned protocol updates have led Litecoin co-founder Charlie Lee to admit that 2019 saw an all-time low in the number of developers working on Litecoin Core, the software behind network nodes.

The start of 2020 was no different and Charlie Lee solicited voluntary donations from LTC miners to help boost development finance. Uncertainties regarding the future of Litecoin have caused investors to lose interest in the project and this is reflected in both the chain and LTC trading metrics.

What’s interesting is that while most would view investor disinterest as a negative factor, some have been quietly hoarding LTC.

Litecoin trading volume drops to a 2-year low

Volume is the most relevant indicator of trader interest and Litecoin has failed miserably in this area.. The volume traded on major exchanges has been trending down over the past twelve months and has recently fallen to its lowest level in two years.

30-day average Litecoin volume. Fountain: TradingView

Litecoin ranks third in Nomic’s transparent trading volume at $ 80 million per day. This is 50% above Bitcoin Cash (BCH) Y EOS, but the figure remains 45% below the previous eleven months when there was a daily average of USD 146 million in volume.

A number of reasons could be behind the drastic change and it should be noted that even less activity on exchanges does not necessarily translate into less blockchain usage, that has been the case.

On-chain metrics provide realistic information on transfers, fees, active addresses, and many useful indicators that will be of interest to merchants.

Adjusted transfer value

The transfer value is a leading indicator in the chain that measures user activity since it adds up all the currencies that move daily. CoinMetrics analysis provides more accurate data by adjusting these figures to exclude mixers and transactions between the same entities.

Litecoin daily adjusted transfer sum 14-day average

14-day average of the sum of the daily adjusted transfer of Litecoin. Fountain: CoinMetrics

Adjusted daily transfers have been around $ 20 million, 83% below 2019 highs. The current level is comparable to Tezos (XTZ), a much newer and smaller cryptocurrency whose main use case has nothing to do with fast or cheap transactions.

A notable drop in transaction fees

Charlie Lee’s proposal included smaller block intervals than Bitcoin (BTC) and a simpler algorithm that de-signed the original data for higher transaction output.

Such a move could have sparked substantial interest in Litecoin (LTC) in the past, but it is no longer valid as users realized that 270 confirmations were needed to match the computing power behind the 3 mined blocks of Bitcoin. , according to the analysis of How Many Confirmations by Luke Childs.

Litecoin mean fees per transaction 14-day average (USD)

Average Litecoin fees per average transaction in 14 days (USD). Fountain: Coinmetrics

Average LTC fees per transaction fell to $ 0.011, which is the lowest level since October 2015. Although many reasons could be behind this, including using 75% SegWit, the above daily transfer value analysis points to weak demand from its users.

While Bitcoin’s median block size most often exceeds 1.2 megabytes, Litecoin averages less than 0.2 megabytes even though they both have a similar capacity.

Low usage translates to small fees, reducing miners’ interest and resulting in a negative feedback loop as investors pay attention to the processing power behind each blockchain.

Reduced hash rate

Litecoin hashrate

Litecoin hash rate. Fountain: CoinWarz

Litecoin’s hash rate has decreased by 45% since its halving in October 2019, generally raising concerns about a possible 51% attack.. This unused processing power capacity could theoretically be used to compete with honest miners.

Either way, there is no positive reading of fewer miners directing investments towards Litecoin. Unlike trading, mining is exclusively a long-term commitment, as the payment usually exceeds a quarter and sometimes a full year.

Investors are hoarding rather than ditching LTC

After so many negative indicators, one would expect the activity of the holders to show weakness as both the price and the use of the network have been declining for more than a year.

Mention could also be made of the lackluster performance of recent code advancements, including the privacy capabilities of the MimbleWimble technology proposed in October 2019.

Litecoin unspent UTXO age

UTXO age of unspent Litecoin. Fountain: Investificar.com.br

Interestingly, the opposite holds, since 63.8% of the Litecoin supply remains intact in the last 12 months. In fact, this is the highest level ever.

According to the Hodl Wave chart above, also known as the UTXO age distribution chart, the percentage of coins that have not moved is increasing at an extraordinary rate.

The number of unturned coins for 12 or more months in early 2020 was 56.7%. This additional 7% held by long-term investors is currently valued at $ 209 million, which is enough to purchase 30% of the entire DASH supply.

There is no way to ascertain the reason behind such accumulation activity, but its impact on circulating supply is a positive net result.

This activity does not change the fact that the same amount of LTC will continue to be mined every day until the next halving in 2023, however it does provide a critical level of price support.

Recently, Investors have been speculating about a possible integration of Litecoin with Cardano (ADA) and if true, this could be a bullish factor for Litecoin.

There is also the possibility of an uptrend of the cryptocurrency market and as investors begin to talk about the start of an ‘altcoin season’, Litecoin could face greater odds of large purchases as investors long Term tend to be less tempted to sell at the beginning price movement.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and commercial movement involves risks. You should do your own research when making a decision.

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If traders ditched Litecoin why are investors hoarding LTC?

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