Litecoin (LTC) is a popular cryptocurrency that has been around since 2011. Despite being one of the oldest and most well-established cryptocurrencies in the market, Litecoin has been overlooked by many investors in recent years. However, new data from on-chain metrics provider Glassnode suggests that Litecoin is undervalued.
As of mid-July 2021, Litecoin was trading at around $120, with a market cap of approximately $8 billion. While not a small number, it is a far cry from the heights that Litecoin reached during the 2017 bull run, when it peaked at over $360 with a market cap of nearly $20 billion. So, what is causing Litecoin’s current undervaluation, and why does Glassnode believe it is a good investment opportunity?
First, let’s understand a bit more about what Glassnode does. Glassnode is an on-chain metrics provider that tracks various data points related to blockchain technology and cryptocurrencies, including transaction volumes, exchange inflows and outflows, and more. By analyzing this data, Glassnode can help investors make informed decisions about their investments.
According to Glassnode, the number of active Litecoin addresses has been steadily increasing since late 2020. This metric, known as the Active Addresses metric, tracks the number of unique addresses that have sent or received Litecoin in a given time period. Generally, a higher number of active addresses indicates that there is more interest and adoption of the cryptocurrency.
In the case of Litecoin, Glassnode’s data shows that the metric has been on an upward trend since the end of 2020, reaching levels that match those seen during the 2017 bull run. This is a positive sign for Litecoin, as it suggests that there is growing interest and adoption of the cryptocurrency.
In addition to the Active Addresses metric, Glassnode also tracks the Number of New Addresses metric. This metric measures the number of unique addresses that have interacted with the Litecoin blockchain for the first time in a given time period. Like the Active Addresses metric, a higher number of new addresses indicates that there is more interest and adoption of the cryptocurrency.
Again, the data from Glassnode shows that the Number of New Addresses metric has been on an upward trend for Litecoin since the end of 2020. This is another positive sign for the cryptocurrency, as it suggests that new users are discovering and using Litecoin.
So, why is all of this important? Essentially, the increase in active addresses and new addresses suggests that Litecoin is becoming more widely used and adopted. This is good news for investors, as it indicates that there is a growing demand for the cryptocurrency. However, despite this growing demand, Litecoin’s price has not yet reached the levels it achieved during the 2017 bull run.
This is where Glassnode’s undervaluation metric comes in. By tracking the ratio of the market capitalization of a cryptocurrency to the number of active addresses, Glassnode can determine whether a cryptocurrency is overvalued or undervalued. If the ratio is too high, it suggests that the cryptocurrency is overvalued and may be due for a price correction. If the ratio is too low, it suggests that the cryptocurrency is undervalued and may be a good investment opportunity.
According to Glassnode’s data, Litecoin currently has an undervaluation metric of around 40. This means that the cryptocurrency’s market cap is 40 times less than the number of active addresses. In other words, there is a lot of demand for Litecoin compared to its current market cap, which suggests that it is undervalued.
Of course, it’s important to note that cryptocurrency investments are always risky. Cryptocurrencies are highly volatile, and their prices can fluctuate wildly based on a variety of factors, including regulatory changes, market sentiment, and more. However, if the data from Glassnode is accurate, it does suggest that Litecoin may be an undervalued cryptocurrency that could be a good investment opportunity.
So, what’s the bottom line? According to Glassnode, Litecoin may be undervalued based on its growing adoption and use. The increase in active addresses and new addresses suggests that there is growing demand for the cryptocurrency, which could be driving its undervaluation. Of course, investing in cryptocurrencies always carries risk, and investors should do their own due diligence before making any investment decisions. However, if Glassnode’s data is accurate, Litecoin may be an undervalued cryptocurrency worth considering for investment.
Litecoin (LTC), the 12th largest cryptocurrency by market value, appears to be trading at discounted prices according to an onchain metric. The market value to realized value (MVRV) Z-score for Litecoin was negative at press time, indicating that the cryptocurrency is undervalued relative to its fair value. This measurement was taken by analytics firm Glassnode and has historically indicated market bottoms and undervaluation.
The calculation for market capitalization is determined by multiplying the total number of coins in circulation by the going market rate. The realized value is different in that it adds the market value of coins when they last moved on the blockchain. The realized value is considered to exclude all coins lost from circulation and is said to reflect the real or fair value of the network.
The Z-score shows by how many standard deviations the market value differs from the realized value. A sub-zero score indicates that a cryptocurrency is undervalued, while scores over eight signify overvaluation and potential market tops. At present, Litecoin’s Z-score has been consistently negative since July 2019.
This is not a new phenomenon, as the indicator has previously consolidated below zero several times in the past. However, negative values have led to meteoric bull runs in the past, prompting some to see discounted prices as an opportunity to invest.
If history is a guide, Litecoin’s current undervaluation suggests that the path of least resistance appears to be higher. However, the cryptocurrency market remains vulnerable to adverse macroeconomic developments, such as liquidity tightening and the state of the global economy.
At press time, LTC was trading at $92, representing a nearly 31% gain for the year. This recent surge has been led by Bitcoin, which itself has recovered nearly 100% from the pandemic-induced crash earlier this year. Litecoin is set to undergo its third mining reward halving in early August, which will reduce the per-block reward paid to miners from 12.5 coins to 6.25 coins.
In conclusion, Litecoin’s undervaluation relative to its realized value and low MVRV Z-score suggests that it may be trading at a discount. While the path of least resistance appears to be on the higher side, the broader cryptocurrency market remains vulnerable to macroeconomic developments. Litecoin’s upcoming mining reward halving in early August could also play a role in its future price movements.
