Litecoin, which was launched in October 2011 by former Google employee Charlie Lee have gained recognition of the crypto market. Over the past 24 hours (February 6th) Litecoin’s market value was up by nearly 5% while price surging to a two week high of $156.
With this, rising its market cap to $10.8 billion, Litecoin rank on 8th place in terms market cap according to the data by CoinMarketCap. The price rally comes along with surge in value of digital coin giants such as Bitcoin and Ethereum. Where Ethereum marked a record high of $1,750.
According to market analysts if Litecoin were to break above $185 in near future, the digital coin would be able to challenge its own all-time high of $417 recorded back in January 2018. Which resulted as the market was driven by institutional investments.
Correlation of Litecoin to Bitcoin price
The correlation of Litecoin with the price of Bitcoin could be better understood if the two coins were to be studied alongside. Bitcoin and Litecoin have many things in common comparison to their differences.
Both of these currencies are decentralized cryptocurrencies and also fiat currencies as of the ones which are issued by a central bank. Further, they both belong to the Proof of Work (PoW) ecosystems. This make the process of mining both these currencies similar.
When considering the differences, Litecoin differs drastically when comparing its market capitalization with Bitcoin, which is much higher. Considering the amount of cryptocurrencies each coin can produce, Bitcoin set its limit at 21 million coins. Whereas Litecoin can accommodate up to 84 million coins. It need to said that the transaction speed of Litecoin is speedier than that of Bitcoin’s.
Based on the correlation analysis of Litecoin in relation to Bitcoin price, it has a very strong positive relationship. The correlation coefficient of their prices is 0.83, which was calculated based on the previous 100-days’ price dynamics of both cryptocurrencies. This was according to the data by Coin Predictor.
Due to the positive correlation, market analysts predict that if the Bitcoin can manage to rally over the barrier of $40,000 then, it is likely that Litecoin will break the short-term downtrend and have a strong price rally.
Correlation of Litecoin to Ethereum price
When comparing Litecoin with Ethereum they aren’t making much similarities as of Bitcoin. These two seems different in nature where Ethereum is a decentralized computer system with its own programming language. Which is different from the blockchain network of Litecoin.
Considering the market cap of the two coins, Ethereum’s market cap is more than five times of Litecoin. Even though Ethereum has a faster block generation time than Litecoin, Ethereum network can get filled up easily and this makes Litecoin to be faster.
According to the correlation chart data obtained through Coin Metrics, it shows that Litecoin have a correlation coefficient of 0.77 with the Ethereum price. This shows that Litecoin and Ethereum have a very strong positive correlation in terms of price. Yet, it is a not strong as to the correlation between Litecoin and Bitcoin.
Conclusion
Over the years the price correlation maintained by Litecoin with regard to Bitcoin and Ethereum is positive. Therefore, it can be concluded that this trend will be followed in future as well. Meaning, when there is a surge in price of either Bitcoin or Ethereum it is most likely that Litecoin price to rise as well.
