Is Litecoin Just A Testnet For Bitcoin Or A Vastly Undervalued Cryptocurrency?

I read a critique on Litecoin recently. The basic premise was that Litecoin is just a testing ground or testnet for Bitcoin. The author seemed to insinuate that Litecoin had little value other than testing new technologies prior to Bitcoin implementing them and was not a valuable standalone cryptocurrency.

Mike Novogratz also chimed in recently, calling Litecoin a “glorified testnet”.

Therefore, many investors believe that Litecoin is currently overvalued relative to Bitcoin.

I would argue the exact opposite case. In fact, I made this precise argument a little over a year ago and the Litecoin price advanced over 500% in the six weeks after the article was published. Meanwhile, the price of Bitcoin “only” advanced by around 150% in the same time period.

So is Litecoin still undervalued relative to Bitcoin?

First, let’s cover the basics. Litecoin was deployed on GitHub on October 7th, 2011. This was roughly 20 months after the launch of Bitcoin. The developer behind the Litecoin platform was Charlie Lee- a former Coinbase Engineering Director and a Google employee at the time.

Litecoin is a hard fork of the Bitcoin Core client with some key modifications. Namely, Litecoin has a slightly modified GUI, an advanced script hashing algorithm (instead of SHA-256), an increased maximum number of coins, and a lower block generation time of 2.5 minutes (vs. 10 minutes for Bitcoin).

One way to look at the valuation is comparing the supply of each token. There will only ever be 21 million Bitcoin and 84 million Litecoin created. The supply of Litecoin is 4x the supply of Bitcoin, so we might expect the price to be somewhere in the general vicinity of 1/4 or 25% of the price of Bitcoin.

With Bitcoin around $5,000, this would put the target value of Litecoin at $1,250. Yet, it is currently trading at just $80. The upside potential, assuming the Bitcoin price stays flat, is 15.6x or 1,460%! We expect the Bitcoin price to rise substantially over the next few years, so the upside for Litecoin could be even higher.

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Disclaimer: I am not an investment advisor. This is just my personal opinion. Invest at your own risk.

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Jason Hamlin 2 months ago Author's comment

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Terrence Howard 2 months ago Member's comment

I'd say Bitcoin is the one that's overvalued!

Michele Grant 2 months ago Member's comment

They are both overvalued and very risky investments.

Currency Trader 2 months ago Member's comment

While I agree #crytocurrency is still in its infancy, I beg to differ with your statement. #Crypto is the future! You'd be wise to get in early. I'm not saying dump all your money into it, but a modest investment could offer tremendous gains.

Adam Reynolds 2 months ago Member's comment

You may be right, but I'd say the "early" days are past and that's where the real money was made. Will #bitcoin ever even approach $20k again? The people who bought it for pennies, or even better mined, and sold high could have become millionaires. You and I will never profit like that. It's simply too late.

Alexis Renault 2 months ago Member's comment

When he says that #Litecoin is a glorified test net for #Bitcoin, what does that even mean? Can you explain? $LTC-X

Craig Newman 2 months ago Member's comment

Great question, let me answer that for you with a simple link: http://lmgtfy.com/?q=testnet

Jason Hamlin 2 months ago Author's comment

Litecoin tends to adopt and test new technologies before Bitcoin. Segwit, Lightning and now confidential transactions, MW, privacy features, scaling tech, etc. After Litecoin shows it can work, Bitcoin adopts the tech at a later date.

Alexis Renault 2 months ago Member's comment

Thanks for explaining!