After a brief surge in early 2023, Litecoin (LTC +1.25%) is once again trading sideways, with seemingly little or no upward momentum. It's currently valued at $85.03, down nearly 80% from the all-time high of $412.96 it set in May 2021.
What's especially troubling is that two catalysts that were supposed to propel Litecoin higher don't seem to be having any influence on the price. While Litecoin is up 20% for the year, it's underperforming against other major cryptocurrencies such as Bitcoin (BTC +0.52%), which is up 32.48% for the year. So is it finally time to give up on Litecoin?
Litecoin halving
On March 5, Litecoin announced that its highly anticipated halving event is just 150 days away. In a halving, the rewards miners receive for processing transactions on a blockchain -- i.e., mining -- are cut by half. This increases the scarcity of a proof-of-work crypto and the cost of mining it, and also makes the crypto more deflationary over time. Both outcomes should be favorable for those who hold the tokens.
Litecoin's halving events occur only once every four years, which is why they are so highly anticipated. Previous Litecoin halvings occurred in August 2015 and August 2019, and both were associated with upward spikes in its price. Theoretically, then, the halving coming in August should also be preceded by a price spike.
Image source: Getty Images.
However, nobody really seems interested this time around. There was a brief surge of interest at the end of 2022, when investors piled into Litecoin. And, yes, it had a brief rally in the first month of 2023. But things appear to have stalled. Litecoin is down 12% over the past 30 days.
Catalysts that aren't catalyzing
Then there's the second potential positive catalyst. On March 2, Litecoin announced a new update to its blockchain network that should have cheered investors. The update added a security patch to Litecoin and increased the ease of mining the tokens. But over the past week, Litecoin has actually declined by 12.92%.
It's easy to discount the impact of the blockchain update because, in the grand scheme of things, it wasn't a huge technological upgrade -- in contrast to The Merge that Ethereum (ETH +2.07%) enacted last year. But it's noteworthy that the upcoming halving is not generating more positive attention. Shouldn't Litecoin be soaring right now?
CRYPTO: LTC
Key Data Points
One reason for Litecoin's puzzling performance could be that it is extremely difficult to time the market around a halving. Even though traders and investors now know the exact date of the upcoming event, it's still close to impossible to get the timing right as a token buyer.
Analysis of the two previous Litecoin halving events is all the proof you need. Around the time of each halving, there was a price spike, a huge correction, and a price decline, before an eventual final price surge. In other words, simply saying that a halving event leads to a price surge is a bit deceptive -- it ignores the fact that a tremendous amount of volatility takes place along the way. Being just a day early or a day late could significantly impact your total return on investment.
Invest for the long run
The difficulty in trying to time the market is why I think it might finally be time to give up on Litecoin. As a long-term investor, I'm simply not willing to play all the short-term market swings involved with Litecoin, and I believe there are other coins out there with superior long-term growth prospects.
Bitcoin, for example, is also a proof-of-work crypto that has a halving event every four years. But there are two key differences. One is that Bitcoin's halving events follow a much more predictable upward trajectory. Another is that Bitcoin's long-term growth prospects are clearly more attractive than Litecoin's. Bitcoin is a superior payment option to Litecoin, and its global adoption rate is much higher.
Given all the volatility in the crypto market, it's smarter to focus on tokens with real long-term growth stories and proven catalysts. For that reason, I can not recommend Litecoin at this time.
