Litecoin was one of the first spinoffs from Bitcoin. From a technical standpoint, Litecoin is almost identical to Bitcoin. However, the one area where it does differ is that it takes less time to mine Litecoin. While a Bitcoin block takes 10 minutes to mine, it takes just 2.5 seconds to mine a Litecoin block. This means that Litecoin allows for faster transactions than Bitcoin does.
However, with both cryptos having very similar frameworks, it does mean that there is a link between how they work and how the price of both cryptos rises or falls.
In general, the price of Bitcoin has stabilised significantly since it first shot into the public eye. Investing in Bitcoin is no longer like placing a wager at a roulette wheel. There is a lot more information about the market out there that makes it a much more measured proposition. This has allowed investors to begin investing in more long-term strategies rather than hoping for a short-term, get-rich-quick type of investment.
This has led to a much slower, but more consistent price rise for Bitcoin over the last couple of years. Bitcoin reached a yearly high price of over $11,000 recently, and part of the reason that Bitcoin has been making gains is down to the relative success of Litecoin.
A new software update is one of the main reasons that people have been moving forward with Litecoin. The new update has made Litecoin 10 times more efficient. This has resulted in lower transaction fees, and Litecoin is now cheaper than ever to use. The price of Litecoin has risen by over 300% in the last six months, and a lot of this rise is due to the software update. This has impacted on Bitcoin in two significant ways.
The first reason that Litecoin has helped Bitcoin to rise in price is that cryptocurrencies tend to follow each other. Whenever there is a rise in the price of one cryptocurrency, it gives traders the impetus to devote more of their resources to the crypto market. This has a knock-on effect of helping other cryptos to rise in the same way that the initial currency did. In the case of Bitcoin, the 43% rise in Litecoin has helped the price of Bitcoin to increase by 20% over the last week.
Another factor in the increase in Bitcoin prices is that more people will be converting from Litecoin to Bitcoin. Because the price rise in Litecoin was steeper than the Bitcoin price rise and Litecoin had lower transaction fees due to its software update, it worked out better to convert Litecoin to Bitcoin for a short period of time. This, in turn, caused a spike in the value of Bitcoin, which has seen gains hit 7% daily at some points. Because Bitcoin is accepted as a method of payment at more outlets than Litecoin, it makes sense for consumers to convert their Litecoin to Bitcoin when it is financially viable to do so. This allows people who want to use their Bitcoins for spending rather than hoarding them to gain some benefit from doing so.
The impact of Litecoin on Bitcoin prices is expected to last until the Litecoin halvening in August. As this will instantly cut the daily supply of Litecoin in half, it could lead to a supply shortage. This, in turn, could impact on the price and decrease the conversion from Litecoin to Bitcoin dramatically.
Whether this will have a long-term impact on the linking of both prices or will just be a short-term impact, at least until Bitcoin has its own halvening, is still to be seen. However, the ability to use Bitcoin at various retail outlets should still ensure that Bitcoin has higher long-term price gains.
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Words: Sean McNulty