Incredibly, the total crypto market cap crossed above $600 billion earlier today (coinmarketcap.com). I’ve been dabbling with cryptos for the last week, and so far I’ve been very impressed. I’ve done 2 Bitcoin transfers, 1 Ethereum transfer, and 3 Litecoin transfers, and the speed of these transfers is revolutionary.
The 2 Bitcoin transfers took 3 hours and 1 hour, the Ethereum transfer took 7 minutes, and the 3 Litecoin transfers took 20 minutes, 4 minutes, and 4 minutes. This is so much faster than traditional wire and ACH transfers it’s not even funny. Moving money from anywhere in the world to anywhere in the world in a matter of hours or minutes is a whole new ballgame.
I’m currently bullish on Litecoin, and I wanted to offer the price target I’m considering, and its underlying assumptions, as food for thought.
Litecoin Price Target
I’m currently targeting a Litecoin price top to occur upon the earlier of:
(i) the Litecoin to Bitcoin price ratio equaling the Bitcoin to Litecoin circulating supply ratio, or (ii) the total crypto market cap reaching $X trillion.
(i) Litecoin and Bitcoin should have proportionate shares of an aggregate market cap because both of these coins are highly similar in their crypto purity: they are decentralized, censor-resistant, deflationary, and there is no pre-mine or insta-mine. In other words, we can argue that these coins are so similar that they should occupy the same market space, and should trade at prices that relate to each other based on the relative number of coins in circulation. (The below analysis does not take into account Bitcoin Cash or any other coins, and their effects, if any, on the relationship between Bitcoin and Litecoin.)
The circulating supply of Bitcoin is 16.7 million, and the circulating supply of Litecoin is 54.3 million. This is a 3 to 10 circulating supply ratio. Assuming an appreciation in Litecoin rather than a decline in Bitcoin (see notes below) to reach this ratio, we can take today’s Bitcoin price of about $18,800, multiply it by .3, and the result is $5,640. You can also play around with median daily prices or volume weighted prices for your starting point crypto price, but for purposes of this post I just used the current trading prices while I was writing this.
A 1 to 4 ratio of the price of Litecoin to Bitcoin is also a decent metric, and one which you’ll see used frequently. This ratio corresponds to the total amount of each coin that can be mined (21 million for Bitcoin and 84 million for Litecoin). I prefer to use the actual circulating supply because the total amount that can be mined is not currently in circulation, and likely will not ever be due to lost coins. Because either approach is an approximation, I think both approaches can be used, and perhaps averaged. Using a 1 to 4 ratio, the result we get when we multiply $18,800 by .25 is $4,700, also quite a high number. If we average our two results ($5,640+$4,700)/2, we get $5,170.
(ii) As to the second prong of the price target, I believe there will be a point at which the entire crypto market has topped. Currently, the total crypto market valuation I’ve been considering is $2.5 trillion, but that’s not much more than a guess. There’s plenty of room for the total crypto market cap to grow, but there’s a critical mass that I think when reached, will put a top into the crypto market. This may be the point where people realize that the Altcoins they have been speculating with and treating like penny stocks don’t have much value to them, and for that reason or for other unforeseen reasons, or perhaps for no reason at all, there begins a mass exodus from the crypto market.
How do you solve for X? I have no idea! If you have thoughts on what X is, I would love to hear them.
Note that the ratios above can also be achieved if Bitcoin experiences a sharp decline in value, so we could get to a 3 to 10 ratio if Bitcoin falls to $1,066, or to a 1 to 4 ratio if Bitcoin falls to $1,280. (Assuming today’s Litecoin price of about $320.)
The $5,640 number in this post’s title assumes an appreciation in the price of Litecoin, but it could very well be the case that Litecoin is already fairly-priced, while Bitcoin is extremely overvalued, so it is Bitcoin that will return to earth while Litecoin will remain stagnant.
$5,640 seems absurdly high, doesn’t it? That said, it is not at all out of line with what we’ve been seeing in the crypto market. It’s a possibility, just as a crash of the entire crypto market is, as well.
What do you think? Let me know in the comments below.
Disclosure: I do own Litecoin and am hodling the living daylights out of it!
If you’ve yet to make a play on cryptos and you’re interested in doing so, you can check out Coinbase to create an account and begin investing in or trading cryptos. If you use the link in the previous sentence and purchase $100 or more of crypto, you will receive $10 of free Bitcoin. If you use Coinbase, you can trade on the integrated GDAX platform using limit orders to minimize fees and costs.
If you’re interested in a good selection of altcoins, you can check out Binance. No fiat there, however, so you’ll have to transfer btc, ltc, eth, or other cryptos from another platform, such as Coinbase, to get started at Binance.
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