A digital token launched 12 years ago as a more transaction-friendly version of Bitcoin is drawing the attention of speculators after a meme-token frenzy drove up costs on the largest blockchain.
(Bloomberg) — A digital token launched 12 years ago as a more transaction-friendly version of Bitcoin is drawing the attention of speculators after a meme-token frenzy drove up costs on the largest blockchain.
Litecoin has rallied almost 20% since May 8, when fees on Bitcoin reached a high of $30 per transaction, compared with a decline in an index of cryptocurrencies. The surge in Bitcoin fees has also driven transactions on the Litecoin blockchain to a record as users sought a cheaper alternative — without spawning a similar jump in costs.
Like Bitcoin, Litecoin relies on a so-called proof-of-work mechanism where “miners” use high-powered computer rigs to order transactions on the blockchain in return for rewards in the token. To facilitate faster transactions, a new “block” of transactions is added every 2.5 minutes on the Litecoin chain, compared with every 10 minutes for Bitcoin.
Litecoin has a market value of about $6.7 billion, making it the 11th-largest cryptocurrency, according to data compiled by CoinMarketCap.com. Bitcoin’s market value is around $516 billion.
The rally in Litecoin’s price is an example of how a proliferation of so-called meme coins on the Bitcoin blockchain has rippled through the cryptoasset space in recent weeks. Litecoin has also been buoyed by speculators piling in before an event on the blockchain known as the halving, where the rewards miners receive for securing transactions is reduced to cap the supply of tokens. Litecoin’s halving is expected to take place in late July or early August.
The recent mushrooming of new tokens has its roots in a new tools that allow developers to mint coins on the Bitcoin blockchain. These are known as BRC-20 tokens. Now that the meme-coin bonanza is starting to fade, there’s a risk that Litecoin’s recent gains could reverse, according to Markus Thielen, head of research at Matrixport.
Moreover, the upcoming halving might also end up being a drag on Litecoin, based on trading during the previous two ones, said Thielen. In both those episodes, Litecoin tumbled in the 50 days leading up to the halving, he said.
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