top of page

Litecoin's Game-Changing Potential: Decoding the LTC/BTC Ratio and the Rise of Low Transaction Fees

What is the LTC/BTC Ratio? The ratio is a measure of Litecoin value in terms of Bitcoin value. For years this ratio has gone down. And as you can tell it has been going down overall. With many spikes along the way. Let's hope another spike upwards is in the future.

You might be worried if this was the USD chart, but it's not. The USD charts look much better. Here is the max chart I could find and with two major mountain tops (not sure the technical term) or all time highs; it almost looks like a 3rd All Time High is inevitable. Again, let's hope for another spike upwards.

Up to this point holding Litecoin over USD has been a good move, holding Litecoin over BTC has not. Many BTC hodlers have made this point ad nauseam. Screaming it from the rooftops. We get it, scoreboard. It's the first quarter though..

So why am I not worried nor should the LTC community be worried about the LTC/BTC ratio? There are a number of reasons I'll explore. And this is all just my opinion (some people think that LTC will explode upwards). The first is that it's very early. Extremely early. Bitcoin or Litecoin as a unit of account is many years or decades away. If ever. We don't really know what's going to transpire from this point in history until Bitcoin possibly takes over. It's nearly impossible to predict everything that will happen and exactly when it will happen. Perhaps an ETF never gets approved, perhaps its once again demonized by governments, perhaps the price goes down, etc. Perhaps Bitcoin has trouble scaling.

The second reason is exactly that; scaling. Now, I don't hate Lightning, but up to this point I don't think it has delivered on its promises. One of the most popular non-custodial lightning wallets has shut down operations in America. This is not a good sign of things to come.

Lightning has been the most popular 2nd layer solution to Bitcoin's scaling problem. While this certainly isn't the end of the road for Lightning, many users including myself don't think the experiment is going well. Even if Lightning does deliver and becomes the dominant 2nd layer solution it will still cost a transaction fee to open and close channels. And remember Litecoin has lightning. I'll repeat that, Litecoin has Lightning. I wrote an article about that. Litecoin could help the Lightning network.

There are other scaling solutions that are in existence and others that will come in the future. What is Bitcoin's scaling problem? amongst other things, it costs a lot of money to transact bitcoin. And as the Bitcoin price goes up you've got to predict that the cost to transact will also go up (in fiat terms). Now there is much more to Bitcoin mining fees but I want to paint a simple picture about what's going on and what could happen. I just opened up Exodus and the cost to send Bitcoin is about 91 sats/byte OR $2.11 USD. As a store of wealth, I think this would be fine. Since you don't really want to move your wealth all that much. As a means of exchange, this just isn't going to cut it. And if you think this is a Bitcoin hit-piece, it isn't. I hold Bitcoin and Litecoin, technically more Bitcoin in USD value, so there.

I know this point has been made thousands of times but I'll make it again. No one is going to buy the proverbial 6 dollar cup of coffee if the transaction costs 2 dollars. It just won't happen. There is also a speed factor. Hence why 2nd layers exist and will continue to exist. 2nd layers will attempt to lower the cost of transaction and put less pressure on the main blockchain. This is where Litecoin can help Bitcoin. With something called Horizontal Scaling. Litecoin is Bitcoin, just running a different mining algorithm and some other parameters. Spending on Litecoin makes a whole lot more sense than spending on Bitcoin currently. Just take a look at the cost of transacting with Litecoin. Not only is it currently cheaper, its faster.

So why do people continue to flock towards Bitcoin while passing on Litecoin? Because the use case of Litecoin is not entirely needed right now. And Bitcoin dominates the narrative. There are many other reasons to be excited about Litecoin (Mweb, interoperability with BTC, block space, speed) but I really wanted to drive home the fact that Litecoin's low transaction fees will be a game changer when the time comes. And if you are reading this, you probably do think that portable, secure, limited, decentralized money will take over. Especially since the fiat regimes around the world are causing inflation that many people just can't handle anymore. When it does take over, many simply think it will be Bitcoin and Bitcoin only. I just don't think Bitcoin will be able to do everything society needs. Especially transactions and transaction volume. That is why I think Litecoin has massive potential. It's not ignoring these future demands that society will need.

Bitcoin is used as a store of value and transactions just aren't that important right now. Let's hypothecate about the future. If Bitcoin becomes the world reserve currency and using Bitcoin becomes that much more important, people won't stand for these high fees when they need to transact. They will capitulate. Litecoin is gearing up to be a digital money with low transaction fees that maintain the almost magical properties of Bitcoin's Proof of Work technology. It remains focused on being the digital Silver to Bitcoin's Gold to make a old school argument.

Hopefully the LTC/BTC ratio will come into balance when the time comes. And if it does come to parity which I personally think it will, wow the Litecoin price will explode. Exciting.


Crypto-Keys Gif.gif
bottom of page