Litecoin (LTC) has had a pretty tough year in terms of price, and the altcoin is currently down 51% over the past twelve months. The lack of GitHub activity and planned protocol upgrades have Litecoin co-founder Charlie Lee to admit that 2019 saw an all-time low in the number of developers working on Litecoin Core, the software behind the network nodes.
In early 2020, it was no different and Charlie Lee asked for LTC volunteer miner donations to raise development funding. Uncertainties about Litecoin’s future have resulted in investors losing interest in the project, which is reflected in both the chain and LTC’s trading metrics.
The interesting thing is that while most view investor disinterest as a negative driver, some have been quietly hoarding LTC.
Litecoin trading volume drops to a 2-year low
Volume is the main indicator of trader interest and Litecoin has failed miserably in this area. The volume traded on the most important stock exchanges has been falling for twelve months and has recently fallen to its lowest level in two years.
Litecoin 30-day average volume. Source: TradingView
Litecoin ranks third in Nomic’s transparent trading volume at $ 80 million per day. This is 50% above Bitcoin Cash (BCH) and EOS, but the number remains 45% below the previous eleven months when the daily volume averaged $ 146 million.
A number of reasons could be responsible for the drastic change, and it should be noted that even less activity on the exchanges does not necessarily translate into lower blockchain usage, which it did.
On-chain metrics provide realistic insights into transfers, fees, active addresses, and many useful indicators of interest to merchants.
Adjusted transfer value
The Transfer Value is a leading on-chain indicator that measures user activity as it adds up all the coins moved daily. CoinMetrics analysis provides more accurate data by adjusting these numbers to eliminate mixers and transactions between the same entities.
Litecoin daily adjusted transfer amount 14-day average. Source: CoinMetrics
Daily adjusted transfers were around $ 20 million, down 83% from the 2019 peak. 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 decrease 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 for higher transaction output.
Such a move may have generated significant interest in Litecoin (LTC) in the past, but it is no longer valid as users became aware that 270 confirmations were required to meet the processing power behind 3 Bitcoin mining blocks, so Luke Childs’ How Many Confirmations Analysis.
Litecoin average fees per transaction on a 14-day average (USD). Source: Coinmetrics
LTC’s average fees per transaction dropped to $ 0.011, the lowest since October 2015. Although there could be many reasons, including 75% SegWit usage, the previous analysis of the daily transfer value suggests poor user demand.
While Bitcoin’s median block size exceeds 1.2 megabytes most of the time, Litecoin averages under 0.2 megabytes, although both have similar capacities.
Low usage translates into low fees, which reduces miners’ interest and creates a negative feedback loop as investors pay attention to the processing power behind each blockchain.
Litecoin hashrate. Source: CoinWarz
The Litecoin hash rate has fallen 45% since it was halved in October 2019, which usually raises concerns about 51% attacks. This unused computing power could theoretically be used to compete with honest miners.
Either way, there is no positive reading from fewer miners directing investments in Litecoin. In contrast to trading, the mining activity is strictly a long-term commitment, as the payout usually exceeds a quarter and sometimes a full year.
Investors hoard instead of dumping LTC
After so many negative indicators, one would expect owner activity to be weak as both price and network usage have been falling for over a year.
One could also mention the lackluster performance of recent code improvements, including the MimbleWimble technology’s proposed privacy feature in October 2019.
Litecoin unspent UTXO era. Source: Investificar.com.br
Oddly enough, the opposite is true, as 63.8% of Litecoin supply has remained untouched in the past 12 months. In fact, this is the highest level ever.
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 at an extraordinary pace.
The number of coins that were not moved for 12 or more months at the beginning of 2020 was 56.7%. That additional 7%, held by long-term investors, is currently valued at $ 209 million, which is enough to acquire 30% of the total DASH offering.
There is no way to guarantee the reasons for such hoarding activity, but its overall impact on circulating supply is positive.
This activity doesn’t change the fact that the same amount of LTC will be mined every day until the next halving in 2023, yet it still provides a critical level of price support.
Lately, investors have been speculating about a possible integration of Litecoin with Cardano (ADA), and if so, it could be a bullish factor for Litecoin.
There is also the possibility that an uptrend is occurring in the crypto market and as investors begin to talk about the start of an “old season” Litecoin could face increased chances of big pumps as long-term investors tend to be less are tempted to move price the first time you sell.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement carries risks. You should do your own research when making a decision.
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