Network Data Shows Litecoin Is Massively Undervalued Compared to Ethereum and Bitcoin



Litecoin has a market cap that is 92x smaller than Bitcoin and 44x smaller than Ethereum. This is quite a large potential upside for Litecoin. Does the current market cap price of Litecoin at $4B make sense or is the market pricing Litecoin based upon a false narrative?


Comparing Litecoin to the Bitcoin network the fair price range today would be $840-$50,300.

Comparing Litecoin to the Ethereum network the fair price range today would be $231-$14,619

We can look at Litecoin network stats compared to both Bitcoin and Ethereum to determine a fair value based upon actual usage of the network.



As we know from Metcalfe’s law “the value of a network is proportional to the square of the number of connected users. As the physical cost of the network grows linearly, its value grows exponentially.” Therefore, if we compare the network usage of each of the three then we should be able to determine the fair price of Litecoin in relation to its network value.


In this analysis, we will compare the following network metrics of Litecoin compared to Bitcoin and Ethereum. This should provide a general fair value price of litecoin. This data can all be found on Tradingview under Glassnode and IntoTheBlock sources.


We will look at active addresses, retail users, total addresses, transactions, total volumes, and new addresses for each network.


This first chart shows the litecoin price in yellow compared to the six network metric price equivalents for Litecoin against Bitcoin. We can see a strong correlation to five of these prior to 2017. Since then there is a large divergence, which suggests the market is not pricing litecoin accurately.

Figure 1: Litecoin network usage model prices compared to litecoin price derived by Litecoin usage compared to Bitcoin usage






This second chart shows the litecoin price in yellow compared to the six network metric price equivalents for Litecoin against Ethereum. We can see that litecoin has been fairly or slightly underpriced prior to late 2020. Since then there is a large divergence, which suggests the market is not pricing litecoin accurately.

Figure 2: Litecoin network usage model prices compared to litecoin price derived by Litecoin usage compared to Ethereum usage







Litecoin Vs Bitcoin Price Equivalent Charts:

The following six charts show the Litecoin network usage compared to Bitcoin network usage shown with equivalent litecoin price.


This chart shows the ratio of the total amount of coins transferred on-chain of Litecoin compared to Bitcoin. It shows that Litecoin has consistently been undervalued with the metric, however in 2013 Litecoin was close to this model price.

Figure 3: Price equivalent model for Litecoin total amount of coins transferred on-chain compared to Bitcoin's


Litecoin total amount of coins transferred on-chain: 43M LTC

Bitcoin total amount of coins transferred on-chain: 4.5M BTC

LTCUSD equivalent: $50,227

Litecoin upside: 881x




This chart shows the ratio of the total addresses of Litecoin compared to Bitcoin. It shows that the Litecoin price correlated well prior to 2019. Since then there is a widening gap showing a large price appreciation opportunity.

Figure 4: Price equivalent model for Litecoin total amount of unique addresses compared to Bitcoin's


Litecoin total number of unique addresses: 154M

Bitcoin total number of unique addresses: 1.02B

LTCUSD equivalent: $803

Litecoin upside: 14x





This chart shows the ratio of retail users of Litecoin compared to Bitcoin. Not exactly sure how the # of retail users are estimated, but comparing this data shows again strong correlations prior to 2017.

Figure 5: Price equivalent model for Litecoin retail users compared to Bitcoin's


Litecoin retail users: 7.3M

Bitcoin retail users: 46.8M

LTCUSD equivalent: $842

Litecoin upside: 14x




This chart shows the ratio of transactions of Litecoin compared to Bitcoin. This ratio also has a strong correlation up to 2019. However, since then the litecoin price has lagged leaving a large opportunity for the Litecoin market cap to appreciate.

Figure 6: Price equivalent model for Litecoin total daily transactions compared to Bitcoin's


Litecoin total amount of daily transactions: 111k

Bitcoin total amount of daily transactions: 270k

LTCUSD equivalent: $2197

Litecoin upside: 38x





This chart shows the ratio of active addresses of Litecoin compared to Bitcoin. Active addresses show that Litecoin has a high level of activity compared to Bitcoin and continues to increase. There is a large price divergence from activity that shows a potentially large opportunity.

Figure 7: Price equivalent model for Litecoin active addresses compared to Bitcoin's


Litecoin active addresses: 295k

Bitcoin active addresses: 160M

LTCUSD equivalent: $1600

Litecoin upside: 28x




This chart shows the ratio of new addresses of Litecoin compared to Bitcoin. Litecoin network growth continues to add more new addresses increasing at a faster rate than Bitcoin.

Figure 8: Price equivalent model for Litecoin new addresses compared to Bitcoin's


Litecoin new addresses: 153k

Bitcoin new addresses: 420k

LTCUSD equivalent: $1951

Litecoin upside: 34x





Litecoin Vs Ethereum Price Equivalent Charts:

The following six charts show the Litecoin network usage compared to Ethereum network usage shown with equivalent litecoin price.


This chart shows the ratio of the total amount of coins transferred on-chain of Litecoin compared to Etherum. Interesting this model was giving a fair price of Litecoin around 130k, up until yesterday when the total amount of coins on ethereum increased from 846k to 7.5M. perhaps the data is incorrect after the move to PoS. Now, this model price is 14k.

Figure 9: Price equivalent model for Litecoin total amount of coins transferred on-chain compared to Ethereum's


Litecoin total amount of coins transferred on-chain: 43M LTC

Ethereum total amount of coins transferred on-chain: 7.6M ETH

LTCUSD equivalent: $14,702

Litecoin upside: 257x



This chart shows the ratio of the total addresses of Litecoin compared to Ethereum. It shows that litecoin has been consistently underpriced but was close in 2019.

Figure 10: Price equivalent model for Litecoin total amount of unique addresses compared to Ethereum's


Litecoin total number of unique addresses: 154M

Ethereum total number of unique addresses: 160M

LTCUSD equivalent: $2,484

Litecoin upside: 43x



This chart shows the ratio of retail users of Litecoin compared to Ethereum. Not exactly sure how the # of retail users are estimated, but comparing this data shows again strong correlations prior to mid-2021. Only recently is this model showing Litecoin is undervalued.

Figure 11: Price equivalent model for Litecoin retail users compared to Ethereum's


Litecoin retail users: 7.3M

Bitcoin retail users: 82.3M

LTCUSD equivalent: $231

Litecoin upside: 4x




This chart shows the ratio of transactions of Litecoin compared to Ethereum. This ratio also has a strong correlation up to mid-2021, with the Litecoin price above this model price. However, since the bull market top in 2021 the litecoin price has fallen below leaving a large opportunity for price appreciation.

Figure 12: Price equivalent model for Litecoin total daily transactions compared to Ethereum's


Litecoin total amount of daily transactions: 111k

Ethereum total amount of daily transactions: 1M

LTCUSD equivalent: $266

Litecoin upside: 4.6x





This chart shows the ratio of active addresses of Litecoin compared to Ethereum. Active addresses show that Litecoin has a high level of activity compared to Ethereum and continues to increase. There is a large price divergence from activity that shows a potentially large opportunity.

Figure 13: Price equivalent model for Litecoin active addresses compared to Ethereum's


Litecoin active addresses: 295k

Ethereum active addresses: 534k

LTCUSD equivalent: $1,422

Litecoin upside: 25x



This chart shows the ratio of new addresses of Litecoin compared to Ethereum. Litecoin network growth continues to add more new addresses increasing at a faster rate than Ethereum.

Figure 14: Price equivalent model for Litecoin new addresses compared to Ethereum's


Litecoin new addresses: 153k

Bitcoin new addresses: 64k

LTCUSD equivalent: $6,155

Litecoin upside: 107x






No matter how you look at the network data for Litecoin you can conclude that Litecoin is massively undervalued.


Litecoin's network usage is on par with Bitcoin and Ethereum suggesting Litecoin's market cap can rise quickly once the market understands this trade opportunity.


This data also doesn't consider the underlying supply dynamics that will occur in the next year with Litecoin undergoing its 3rd block rewards halving which likely will result in a massive supply shock and price increase.


Perhaps, it's time to look into litecoin while it's $56 dollars.







Equivalent Calcs:


To get an equivalent price the ratio for litecoin to bitcoin must be divided by 3.716 and for equivalence for litecoin to ethereum it must be multiplied by 1.719.


This is done because the circulating supply is 3.71 more litecoin than bitcoin today and there are 1.719 less litecoin than ethereum today.


Circulating Supply:

Ethereum circulating supply: 122,379,467 ETH

Bitcoin supply: 19,151,400 BTC

Litecoin supply: 71,174,819 LTC


Sources:

1. https://medium.com/pm101/metcalfes-law-and-why-you-should-keep-it-in-mind-9a3b217226fc#:~:text=Metcalfe's%20law%20says%20that%20every,of%20nodes%20in%20the%20network.

2. https://www.tradingview.com/