Why is the value important?
The LTC/BTC value defines how expensive a Litecoin is relative to the current crypto goldstandard- the Bitcoin. When fully mined there should be 21million BTC in circulation compared to the 84million of LTC. To the layman this would give reason to expect that one day the cost of one LTC will be 0.25BTC. Currently at just over a tenth of that, it seems LTC is cheap to buy.
From observations over the last 6 months its clear the LTC/BTC ratio thrives on positive Bitcoin news however we are now getting glimpses of decoupling from this source. Why is this? It’s common understanding that when Bitcoin thrives, people who feel they have missed the boat or don’t want to buy smaller than 1BTC denominations look to alternative crypto currencies. Litecoin often being the favourite. Historically as it was hard to convert fiat to LTC this meant many people went through the BTC medium thus causing LTC/BTC to soar. When BTC hit its $1300 peak in December 2013, LTC/BTC was at a level in excess of 0.045, nearly twice what it is now.
When the tables turned and BTC was plagued with bad news (mtgoxed) the LTC/BTC fell through dropping below 0.020 but not as low to levels seen before the 2013 BTC boom.
Evidence of decoupling can now be seen through the rise of LTC/BTC up 25% with lack of positive news regarding BTC and crypto in general. The catalyst for the rise can be explained with recent listings on BTCChina and speculation of Huobi in the mix.
So why is LTC/BTC important to most speculators? The value that can be gained in LTC strengthening against BTC used as a hedge for a lack of rise in the USD (other fiat) value of BTC. Quite simply, why buy 1 BTC now and hope for a rise when you can buy 40 LTC and then convert back to 10 BTC in the future? I’m sure the sharper readers will take comment that if LTC/BTC does ever near 0.25, its more than likely there would be little reason to buy back BTC as LTC adoption would be more than satisfactory with fiat value high enough to suit.
LTC/BTC Mid-March 2014