Most of the time, cryptos don’t go up in value because of their usefulness but because of their hype.
And when I say “most of the time”, I’m being generous. It’s more like 99% of the time.
As I wrote yesterday, Litecoin is a prime example of this. It is simply a clone of bitcoin, with a larger supply and faster block times.
But it’s those faster block times, and what they tell us about bitcoin’s future prices, that we’re interested in today.
How Litecoin’s prices foreshadow bitcoin’s
Foreshadowing is a plot device used in just about every story.
It’s basically like giving the reader or viewer a slight clue as to what’s going to happen – but only if you’re looking out for it. It’s like a reward for paying attention.
The filmmaker Edgar Wright is the king of this, and his film Shaun of the Dead has many foreshadowing moments, including possibly the best of all time, as Film School Rejects points out.
From Film School Rejects:
In the scene Ed describes his drinking plan for the following day with Shaun – saying that they should have “A bloody Mary first thing, a bite at the King’s Head, couple at The Little Princess, stagger back here and bang… back at the bar for shots.” Which is exactly what they do in the film – killing a zombie with the nametag ‘Mary’ followed by going to Shaun’s stepfather’s place to see that he’s been bitten, followed by picking up Shaun’s love interest and her friends before pretending to be zombies while going back to the pub where they find themselves warding off zombies with a gun. He literally describes the entire plot in a sentence – how awesome is that?
Now, because Litecoin has faster block times than bitcoin, it can sometimes foreshadow how bitcoin will move… specifically in relation the upcoming halvening.
(If you’re not sure what the halvening is, or why it’s important, you can read my article on it here, which will tell you everything you need to know.)
Litecoin is due for its halvening in around 52 days, on 6 August.
On that day mining rewards per block will halve, from 25 Litecoin to 12.5 and so the rate Litecoin’s supply is expanding will halve.
Bitcoin is not due for its next halvening until May 2020.
So many people see Litecoin’s price behaviour in the run-up to its halvening as foreshadowing what bitcoin’s price will do in the run-up to May 2020.
Correlation does not imply causation
As you can imagine, Litecoin is currently drawing a lot of attention.
Here’s what Binance Research had to say about it a few days ago:
And there’s no denying Litecoin is one of the most hyped cryptos out there right now. And one of the easiest for people to buy, as I wrote about yesterday.
What’s not clear, however, is if its price is going up because the halvening is approaching, or if its price is going up because of all the attention the halvening is bringing it.
They might sound like two sides of the same coin, but they are not.
If Litecoin is going up because its halvening is approaching, then the price is likely to keep going up, and hold or even increase after the halvening happens.
If Litecoin is going up because of hype about its halvening, its price is likely to crash before, or shortly after the halvening happens.
As you can see, from an investor’s point of view, it makes a big difference.
And it also makes a big difference as to what we can expect from bitcoin as its own halvening approaches.
Given what’s been going on in Litecoin, we would expect bitcoin to follow a similar pattern and experience a massive increase in price.
However, this is crypto. And crypto prices tend to do the opposite of what most people, including crypto experts, think they will.
Bitcoin gets a lot more attention than Litecoin, and has interest from many different areas. It would be foolish to base any price prediction on one factor alone. Things don’t happen in isolation.
So, although Litecoin’s pre-halvening price surge points to a similar thing happening to bitcoin, there are no guarantees that will happen.
One thing is for sure though, as bitcoin’s halvening draws nearer, it’s going to create a lot of hype, which could push the price up more than the actual halvening ever could.
Although if that did happen, I guess we would still have to credit the halvening itself for creating that hype in the first place.
What are the best crypto buys right now?
Now, if you’re wondering about the best way to get into crypto, I can highly recommend Sam Volkering’s book: Crypto Revolution. This book contains everything you need to know to become a clued-up crypto investor.
And unlike many crypto books, it’s not just fluff and it’s not written by someone who’s only been into crypto for the last couple of years.
Sam has been active in the crypto scene from the very beginning and uses both his technical and his investment expertise to write a compelling case for why and how you should be investing in crypto.
This book was a hugely popular when he first published it a couple of years ago, but given all that’s gone one since then, Sam has written a new, updated second edition with an extra 80 pages of content. This second edition brings everything up to date with current news, prices and predictions.
Editor, Exponential Investor