Litecoin has enjoyed a return to the limelight this week and a return to the number 5 spot in the market cap rankings coming off the back of a rally that started off in the early hours of Wednesday morning, with Litecoin surging 49.6% to Thursday’s high $237.72, before easing back to $218.88 at the time of writing.
Litecoin Daily Chart
The rally has come at a time when investor sentiment has been a little edgy following a number of governments and regulators stepping out to discuss their intentions vis-a-vis the cryptocurrencies and the Initial Coin Offering markets.
The latest Litecoin rally has fallen well short of the December rally to an all-time high $304 back, but when considering the fact that the total cryptomarket cap is down almost $400bn from its December highs, expecting to hit fresh record highs would be unrealistic when considering the degree of uncertainty around the outlook towards the regulatory landscape that continues to plague the market.
Litecoin’s rally this week has been an isolated one and, in spite of Bitcoin managing to recover to $10,000 levels this week, the Litecoin gains can be attributed to a number of events.
The team’s planned rollout of LitePay on 26th February and news of Coinbase launching its ‘Coinbase Commerce’ software enabling vendors to accept payments in Bitcoin, Bitcoin Cash, Ethereum and Litecoin has garnered a pickup in interest for the crypto this week, but perhaps of greater interest for the speculative investor has been the talk of a Litecoin hard fork.
Perhaps the very fact that this week’s rally ensued on Wednesday and not on Monday, in response to the announcement of the scheduled rollout of LitePay later this month, is evidence in itself that the 50% gain has come in anticipation of Litecoin’s hard fork this weekend.
The news of a Litecoin hard fork had hit the wires on 3rd February, but as has been the case with the Bitcoin hard forks, there’s no real need to have exposure to the cryptocurrency for any particular period in advance of the hard fork, as long as the investor holds Litecoins at the time of the actual hard fork.
Looking at exchange volumes, Gdax has seen the largest LTC/USD trades over the last 24-hours, accounting for 15.19% of total volume, with Okex coming in second, with 10.74% of total volume, supporting the view that much of the moves this week are attributed to speculative trades ahead of a possible Sunday hard fork, when looking at the material increase in trading volumes. (Data sourced from Coingecko)
On 14th February alone, trading volumes jumped from a previous day 483,460,000 to 2,383,340,000, with volumes exceeding 2,000,000,000 for the first time since the first week of the year rally.
What is Litecoin hard fork?
Litecoin’s hard fork is scheduled for Sunday, 18th February or Litecoin block 1371111 and will result in the creation of Litecoin Cash, as was the case with Bitcoin’s hard fork August of last year.
Holders of Litecoin have been advised that they will receive 10 Litecoin Cash coins for each Litecoin held at the time of the fork.
Unlike Litecoin, the new Litecoin Cash coin (“LCC”) will be run with Bitcoin and Bitcoin Cash’s SHA256 algorithm and not Script that is used for Litecoin.
Other than the mining algorithm used for verifications, the two other key differences to Litecoin will be the maximum supply, with the total supply of LCCs being 840 million coins, compared with Litecoin’s (“LTC) 84 million and the difficulty adjustment, which is every block (DarkGravity) compared with Litecoin’s 3.5 days.
For miners, there will certainly be plenty of incentive to mine for Litecoin Cash, with the SHA256 proof-of-work algorithm enabling miners to use obsolete Application-Specific Integrated Circuits (“Asics”) Bitcoin mining hardware to mine for Litecoin Cash.
According to the Litecoin Cash website, mining difficulty will be recalculated every block, using Evan Duffield’s DarkGravity V3 algorithm from Dash, which reportedly provides more predictable block times as well as network protection from multipool hopping.
Target block time of 2.5 minutes delivers transaction speeds that are 4x faster than Bitcoin, whilst transaction fees are reportedly 90% cheaper than Litecoin.
The LCC team has also implemented a ‘Slow-Start Control’ system in order to prevent dominant early miners from having an unfair advantage, with block rewards starting at 1.25 LCC before growing to 250 LCC over the first 400 blocks after the fork. The first 24 blocks after the fork will be mined at minimum difficulty, following which DarkGravity will adjust the difficulty based on block generation time.
The LCC team are ultimately looking to deliver a fast, cheap SHA256 coin with favorable difficulty adjustment. Current SHA256 miners are limited for choice of coins to mine, whilst also being paid by a cryptocurrency with 10 minute block times.
How to claim your Litecoin Cash?
For Litecoin holders, it is important to store the Litecoins in a private Litecoin wallet and not on an exchange, where holders will have no way of accessing the private key needed to claim LCCs.
It is advised to hold Litecoin in a Litecoin wallet where the holder will have controls of the private keys, such as a desktop wallet Litecoin Core or Jaxx.
If a Ledger is being used, it would be advisable to move the coins from the Ledger to a Litecoin desktop wallet until the fork block takes place.
Litecoin holders are reportedly not required to have wallets open or unencrypted during the fork, with paper wallets and other forms of cold wallets expected to receive LCCs without any issues.
For Litecoin holders, in the interest of safe forking, private keys that hold live coins should never be pasted into any wallet or website in order to claim LCCs. Once the fork has taken place, Litecoin holders should move the Litecoins to a new address and then use the private key from the old address to claim the new LCCs.
At present, the LCC team have stated that no announcements have been made by exchanges supporting LCC that will credit LTC holders with LCC automatically. In the event that Litecoin holders have stored their coins with a 3rd party, it is advisable to inquire about the claiming of Litecoin Cash in advance of the fork, in the event that they have not been transferred to a private Litecoin wallet.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.