Price wise, Litecoin (LTC) has already established a pretty rough year and currently the altcoin is down 51% within the last twelve months. The lack of GitHub activity and planned protocol upgrades have Litecoin co-founder Charlie Lee to admit 2019 saw a historic low in how many developers focusing on Litecoin Core, the software behind network nodes.
The beginning of 2020 was no different and Charlie Lee asked for voluntary LTC miner donations to greatly help boost development funding. Uncertainties regarding Litecoin’s future have caused investors to lose curiosity about the project and this is reflected both on-chain and in LTC’s trading metrics.
The interesting thing is, despite the fact that most would consider investors’ disinterest a poor driver, some have been quietly hoarding LTC.
Litecoin trading volume drops to a 2-year low
Volume is the single most relevant indicator of traders’ interest and Litecoin has been failing miserably in this area. Traded volume on major exchanges has been trending down for yesteryear twelve months and it has recently dropped to its lowest level in couple of years.
Litecoin 30-day average volume. Source: TradingView
Litecoin ranks third on Nomic transparent trading volume at $80 million daily. This is 50% above Bitcoin Cash (BCH), and EOS nevertheless the figure remains 45% below the previous eleven months when there was $146 million in daily volume on average.
A amount of reasons might be behind the drastic change and it should really be noted that even lower activity on exchanges doesn’t necessarily translate to less blockchain usage, that has been the case.
On-chain metrics provide realistic insights in to transfers, fees, active addresses, and many of good use indicators that’ll be of interest to traders.
Adjusted transfer value
Transfer value is a leading on-chain indicator measuring user activity because it adds up all coins moved daily. CoinMetrics analysis provides more precise data by adjusting these figures to exclude mixers and transactions between the same entities.
Litecoin daily adjusted transfer sum 14-day average. Source: CoinMetrics
Daily adjusted transfers have now been hovering around $20 million which is 83% below peak 2019 levels. The current level is related to Tezos (XTZ), a much newer and smaller cryptocurrency whose primary use-case has nothing to do with fast or low priced transactions.
A noticeable drop in transaction fees
Charlie Lee’s proposal included smaller block intervals than Bitcoin (BTC) and an easier algorithm which removed the signature from the original data for an increased transaction output.
Such a move might have brought substantial curiosity about Litecoin (LTC) in the past nonetheless it is no longer valid as users became aware that 270 confirmations were necessary to match the computing power behind 3 Bitcoin mined blocks, in accordance with Luke Childs’ How Many Confirmations analysis.
Litecoin mean fees per transaction 14-day average (USD). Source: Coinmetrics
LTC’s mean fees per transaction dropped to $0.011 that is the lowest level since October 2015. Although many reasons might be behind this, including 75% SegWit usage, the previous daily transfer value analysis points to weak demand from its users.
While Bitcoin’s median block size exceeds 1.2 megabytes most of the time, Litecoin averages below 0.2 megabytes despite both having similar capacity.
Low usage means small fees, reducing miners’ interest and resulting in a negative feedback loop as investors pay attention to the processing power behind each blockchain.
Litecoin hashrate. Source: CoinWarz
The Litecoin hashrate decreased by 45% since its October 2019 halving, which usually raises concerns of 51% attacks. This unused processing power capability could theoretically be properly used to contend with honest miners.
Either way, there isn’t any positive read of fewer miners directing investments towards Litecoin. Unlike trading, mining activity is exclusively a long-term commitment as the payout usually exceeds a quarter and sometimes a complete year.
Investors are hoarding rather than dumping LTC
After so many negative indicators, you might expect holders’ activity to show weakness as both the price and network usage have now been trending down for over a year.
One may possibly also mention the lackluster performance of recent code advancements, including the MimbleWimble-technology privacy capability proposed in October 2019.
Litecoin unspent UTXO age. Source: Investificar.com.br
Oddly enough, the opposite holds, as 63.8% of Litecoin supply remains untouched in the past 12 months. In fact, here is the highest level ever.
According to the above Hodl Wave chart, 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 unmoved for 12 or maybe more months in the beginning of 2020 stood at 56.7%. This additional 7% held by long term-investors is valued at $209 million which is enough to acquire 30% of the complete DASH supply.
There’s no way in order to guarantee the rationale behind such hoarding activity, but its impact over circulating supply is just a net positive.
This activity does not change the fact the same level of LTC will still be mined every single day until next halving in 2023, but it really provides a critical price support level.
Recently, investors have been speculating about a potential Litecoin integration with Cardano (ADA) and when true, this may be a bullish factor for Litecoin.
There can be the possibility of a crypto-market bull trend occurring so when investors commence to speak about an ‘alt season’ starting, Litecoin may face increased odds of large pumps as long-term investors tend to be less tempted to offer at the very first price move.
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