As for the price Litecoin (LTC) has had a fairly difficult year and Altcoin is currently down 51% in the past 12 months. Lack of activity on GitHub and planned protocol updates have caused Charlie Lee, co-founder of Litecoin, to admit that 2019 saw a record low in the number of developers working on Litecoin Core, the software behind the network nodes.
It was no different in early 2020, and Charlie Lee asked LTC miners for voluntary donations to advance development funding. Uncertainties regarding the future of Litecoin have led to investors losing interest in the project. This is reflected in both the chain and LTC’s trading metrics.
It is interesting that most would view investor disinterest as a negative factor, but some have quietly accumulated LTC.
Litecoin’s trading volume drops to a 2-year low
Volume is the main indicator of merchant interest, and Litecoin failed miserably in this area. Trading volume on the major stock exchanges has declined in the past twelve months and has recently fallen to the lowest level in two years.
Litecoin average volume of 30 days. Source: TradingView
Litecoin ranks third in Nomic’s transparent trading volume at $ 80 million a day. That’s 50% above Bitcoin Cash (BCH) and EOS, but the number remains 45% below the previous eleven months when there was an average daily value of $ 146 million.
The drastic change could be responsible for a number of reasons, and it should be borne in mind that even less activity on exchanges doesn’t necessarily result in less use of blockchain, which was the case.
On-chain metrics provide realistic information about transfers, fees, active addresses and many useful indicators that are of interest to merchants.
Adjusted transfer value
The transfer value is a leading indicator in the chain that measures user activity as it adds up all the coins that are moved every day. CoinMetrics analysis provides more accurate data by adjusting these numbers to exclude mixers and transactions between the same entities.
14 day average of Litecoin’s adjusted daily funds transfer. Source: CoinMetrics
Adjusted daily transfers were approximately $ 20 million, 83% below the 2019 high. The current level is comparable to Tezos (XTZ), a much newer and smaller cryptocurrency whose primary use case has nothing to do with fast or cheap transactions.
A noticeable drop in transaction fees
Charlie Lee’s proposal included smaller block intervals than Bitcoin (BTC) and a simpler algorithm that removed the signature from the original data in order to achieve higher transaction output.
Such a move could have aroused great interest in Litecoin (LTC) in the past, but is no longer valid since users realized that 270 confirmations were required to achieve the computing power behind the 3 mined blocks of Bitcoin, according to the analysis by Luke Childs’ How Many Confirmations.
Litecoin average rates per 14-day average transaction (USD). Source: Coinmetrics
Average LTC fees per transaction fell to $ 0.011. This is the lowest level since October 2015. Although there could be many reasons behind this, including the use of 75% SegWit, previous daily analysis of the broadcast value indicates weak demand from its users.
While the average block size of Bitcoin is more than 1.2 megabytes most of the time, the average litecoin value is less than 0.2 megabytes, although both have a similar capacity.
Low usage leads to low fees, which reduce miners’ interest and lead to a negative feedback loop, as investors pay attention to the processing power behind each blockchain.
Reduced hash rate
Litecoin hash rate. Source: CoinWarz
Litecoin’s hash rate has dropped 45% since halving it in October 2019, which generally raises concerns about a possible 51% attack. This unused computing power could theoretically be used to compete with honest miners.
In any case, There is no positive assessment that fewer miners invest directly in Litecoin. In contrast to trade, mining is only a long-term obligation, as the payment usually exceeds a quarter and sometimes a whole year.
Hoarding investors instead of getting rid of LTC
After so many negative indicators, you’d expect owner activity to show weakness, as both price and network usage have been declining for over a year.
One could also mention the mediocre performance of recent code enhancements, including the privacy features of the MimbleWimble technology proposed in October 2019.
UTXO age of unspent Litecoin. Source: Investificar.com.br
Oddly enough, the opposite is the case there 63.8% of Litecoin supply has remained intact in the past 12 months. In fact, this is the highest level in history.
According to the Hodl Wave chart above, also known as the UTXO age distribution chart, the percentage of coins that have not moved is increasing extremely rapidly.
The number of coins not moved for 12 months or more in early 2020 was 56.7%. This additional 7%, held by long-term investors, is currently valued at $ 209 million, enough to purchase 30% of the total DASH offering.
There is no way to be certain of the reason for this accumulation activity, but its impact on the circulating supply is a positive net result.
This activity does not change the fact that the same amount of LTC is mined every day until the next halving in 2023, but does offer a critical level of price support.
Recently, Investors have speculated about the possible integration of Litecoin in Cardano (ADA), and if so, it could be a bullish factor for Litecoin.
There is also the possibility of an upward trend in the cryptocurrency market, and when investors talk about the beginning of an “altcoin season”, Litecoin could be more likely to face large purchases if investors tend to be less tempted to wait a long time to sell at the first price move.
The views and opinions expressed here are solely those of author and do not necessarily reflect Cointelegraph’s views. Every investment and trade movement carries risks. You have to do your own research when making a decision.