The performance of Litecoin (LTC 1.06%) has lagged behind that of Bitcoin (BTC -2.41%) and Ethereum (ETH -1.06%) over the first six months of 2023. For the year, Litecoin is up about 50%, compared to 60% for Ethereum and more than 80% for Bitcoin.
But after finally breaking through the $100 price level on June 30, Litecoin is once again attracting the attention of investors. Some are even suggesting it could double in price by the end of the year.
But just how much room to run is in this Litecoin rally? While there are two important catalysts that could lead to a breakout for the crypto in the second half of the year, the potential impact of these catalysts is still very much up in the air.
The BlackRock rally
The first catalyst for Litecoin is the so-called "BlackRock rally." This refers to the dramatic chain of events in June that was touched off as soon as BlackRock (BLK 0.69%), the world's largest asset manager, announced that it was filing an application for a spot Bitcoin exchange-traded fund (ETF). This seemed to indicate that there was tremendous pent-up demand for Bitcoin from institutional investors. Immediately, Bitcoin rallied, followed by other top cryptocurrencies.
The application for a new spot Bitcoin ETF was almost immediately followed by the announcement that a group of Wall Street firms had launched EDX Markets, a brand-new exchange for trading only four cryptos: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash (BCH -1.49%). Being part of this elite group could be a huge catalyst for Litecoin, especially because this new exchange is only for institutional investors.
The thinking here is that Litecoin has received the imprimatur of Wall Street, and that this crypto is now "safe" for institutional investors to buy and hold. This could spark a rally in Litecoin. Analysts point to the example of Bitcoin Cash, which has already rallied more than 110% since being included on the EDX exchange. So now analysts think that Litecoin, too, has the potential to double in value within a relatively short period of time.
The Litecoin halving
The other key catalyst is the Litecoin halving. This refers to an event scheduled for Aug. 2, when the rewards paid to cryptocurrency miners for mining a new block on the Litecoin blockchain will be cut in half. This event occurs only once every four years, and it is usually accompanied by quite a bit of fanfare in the crypto markets.
Image source: Getty Images.
This is due, in large part, to the positive impact that past halving events have had on the price of Litecoin. Investors have analyzed the impact of past Litecoin halvings in 2015 and 2019, and have determined that there is typically price appreciation heading into the halving, and then an even bigger move after it.
The problem here, however, is that past performance is no guarantee of future results. Frankly, we should have already seen a much larger price move for Litecoin if a significant halving effect were going to happen in 2023.
Right now, there are only about 30 days left until the halving, and with each passing day the likelihood of a big rally becomes less likely. Any decision to buy Litecoin now seems like market timing rather than a prudent long-term investment.
Should you buy Litecoin?
The outlook for Litecoin heading into July is better than it has been in some time. However, I remain skeptical about its long-term upside potential. The influx of institutional money into Litecoin is a positive development, and should help to boost its price over the long haul.
But I'm less optimistic about the impact of the halving. Until recently, the cryptocurrency was having a difficult time breaking through the $100 price point. So I attribute any recent gains to the BlackRock rally and to the general improvement in overall market sentiment about crypto. In other words, nothing fundamental has changed with Litecoin.
With that in mind, I think it's time to give up on Litecoin. From my perspective, Bitcoin remains a superior investment, especially when it comes to long-term upside. Right now, it is leading the market higher, and Litecoin is simply along for the ride. If you are looking for one cryptocurrency to buy and hold forever, it's Bitcoin.
