Hold onto your hats, crypto investors…
Litecoin might have been hijacked.
The start of the new year has been detrimental to the entire cryptocurrency market.
With billions of dollars practically being shaved off the market value as a whole, the most popular digital assets are now mere shadows of their former record-breaking selves.
Despite the rest, Litecoin has performed fairly well during these turbulent token times.
So, why have things changed?
What’s Going on With Litecoin?
The world’s fifth-largest cryptocurrency dropped even more last Thursday, February 22nd — just a week after it had soared following the Litecoin Cash (LCC) fork.
So, why is it dropping again?
As of midday-February 22nd, Litecoin was down to $207 — a 7.2% loss.
The digital token had fallen almost 20% last week, from highs of $254. The coin is followings alongside a broader trend that had all major cryptos in the red on Thursday.
However, Litecoin had been performing remarkably well in light of the January and February crypto crash and the onset of a bear market.
Its price plummeted to a low of $100.20 on February 2nd‘s decline. But on the subsequent recovery, its price regained over 100%, breaking into the mid-200s.
From there, it deviated from the top players, Bitcoin and Ethereum, and absolutely exploded on February 19th to over $250 — leaving all other cryptos in the dust.
But shortly after, the momentum behind the upsurge vanished, and Litecoin plummeted again with extreme volatility — falling almost 20% over the course of two hours.
Since then, it’s bounced all around within a relatively tight range: between $205 and $230.
Fundamentally, there seems to have been no news that has contributed to Litecoin’s major price fluctuations. And the same goes for other major cryptos.
The only recent news that could be attributed to its recent volatility was the highly suspicious rollout of a hard fork, Litecoin Cash, earlier last week.
Litecoin’s founder, Charlie Lee, warned people on Twitter against Litecoin Cash:
Lee attempted to buy back the newly forked coins over the suspicion of malicious pretenders looking to defraud and trick Litecoin owners into revealing their private keys and passwords.
One of the big draws to crypto forks is the free equivalent coins that are available when a split occurs.
This is exactly how the Litecoin Cash “founders” are trying to generate support: They claim to be offering 10 free LCC tokens for every Litecoin that users hold.
That’s almost enticing enough to jump right in, but there’s a catch…
In order to receive the free LCC altcoins, a private key or password from the Litecoin holder’s wallet needs to be imported into the new Litecoin Cash wallet.
Seems pretty fishy and inherently risky…
Also, it doesn’t really make sense for people to recklessly jump in to buy Litecoin with the hopes of gaining forked Litecoin Cash.
Nobody really knows whether or not Litecoin Cash is legitimate yet. There are no established markets or exchanges on which investors can sell their newly acquired Litecoin Cash, and there’s no verifiably safe way to obtain the forked digital tokens.
So, it would seem that the Litecoin bull run was mostly due to exuberance and technical factors — not because of the questionable fork.
In response to the malicious activity in question, the following comment was found on the Litecoin Cash website:
We’re using the Litecoin Cash name simply because it has become customary in recent months for a coin which forks a blockchain to prefix its name with the name of the coin being forked. This practice has become a widely understood convention. We’re not associated or affiliated with Charlie Lee or any of the Litecoin team in any way; we are big fans though.
As we’ve seen previously in the Bitcoin community, a fork isn’t just a split of the chain. The founders and fans are also divided.
Charles Hayter, CEO of digital currency comparison service CryptoCompare, said the recent surge in Litecoin was “bitcoin’s story of last year playing out for litecoin holders.”
Because there are open-source protocols, anybody can fork and modify the code.
If there’s a difference of opinion within a community, then hard forks are inevitable. If a group can convince enough people to run their updated version of the code, then you have a fork.
But it often happens that a fork is simply a money grab — a kind of hijacking of a global brand, such as Bitcoin and Litecoin — in order to make a quick profit.
But with scams abound, it’s always a good idea to play it safe in crypto land. Do your homework before diving in.
The Bottom Line
When explaining Litecoin’s most recent declines last week, several analysts are claiming that the digital asset was simply following the market lower, instead of reacting to controversial fork news.
The pullback in Litecoin is indicative of the general crypto market pullback. And most cryptos are in the red after a small peak last Wednesday, February 21st.
This pullback in the market doesn’t appear to be driven by fundamentals, but instead a normal reset after a steady price rise from the recent lows.
As the market adjusts itself, Litecoin might experience more aggressive selling than the broader market due to its recent gains.
When looking at the monthly charts, Litecoin is still up 22%. But Bitcoin is just under 1%, and Ethereum is down 13%.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today