While Bitcoin has been getting the lion’s share of the press, other cryptocurrencies have been on tears of their own. Among the most remarkable is Litecoin, an increasingly popular cryptocurrency that has already risen more than 100% in the last few months.
Like Bitcoin and other popular cryptocurrencies, the ride for Litecoin investors has been anything but smooth. Volatility is the watchword here, and those wild price swings are sure to continue for some time to come.
Indeed, Litecoin may be riding high now, reaching a recent price of more than $77 per coin. It was not that long ago, however, when the price was less than half that. Further proof that volatility in the cryptocurrency markets has reached extreme proportions.
So what is responsible for the sharp rise in Litecoin prices, and can investors expect that recent ascent to continue? As with everything in the cryptocurrency market, the answers to those questions are somewhat complicated. No one should invest in these cryptocurrencies with money they cannot afford to lose, and at the moment Litecoin remains highly speculative and highly volatile.
Experts disagree on the reasons behind the latest moves in the Litecoin market. Some claim that the enormous returns in the Bitcoin market have sparked interest in alternative forms of cryptocurrency. As the price of Bitcoin continued to spike, they say, investors looked for other, more affordable entry points into the market.
That certainly makes sense, especially since Bitcoin has risen from a relatively low $600 to nearly $6,000 in an amazingly short period. There is reason to think that new investors were drawn to the low price of Litecoin, especially when the cryptocurrency was selling for less than $35.
Also, Litecoin and Bitcoin have shown strong price correlation in the past, further reinforcing the theory that the rise in Bitcoin has benefited Litecoin investors as well.
Other cryptocurrency watchers argue that the recent run-up in Litecoin prices is the result of Bitcoin investors hedging their bets. They claim that Bitcoin investors are preparing for another drop in price and that they are spreading their risk around with investments in Litecoin, Ethereum, and other alternative cryptocurrencies.
That makes sense too since diversification has always been a defense against market volatility. Stock market investors have long used this strategy to reduce their level of risk, selling out of single stocks and investing the money in highly diversified mutual funds instead.
Since the level of volatility in the cryptocurrency market is orders of magnitude greater than even the riskiest stock, it just makes sense that investors would hedge their bets and that they would take some of their Bitcoin profits and put it into Litecoin.
No one knows for sure what is behind the recent doubling in Litecoin prices, and there is probably not one single answer. Everyone who buys Litecoin has their reasons for doing so, and there is no such thing as a typical Litecoin investor. One thing is certain, however – those who bought into the Litecoin market at the recent lows have been handsomely rewarded for their courage and their foresight.