[2014-08-19] The Bitcoin-Litecoin Decoupling, Redux

[austins]

http://techcrunch.com/2014/08/18/the-bitcoin-litecoin-decoupling-redux/

The price of litecoin and bitcoin, two of the most prominent cryptocurrencies, once saw their prices go up and down in something approaching a consistent ratio.

That’s to say that bitcoin was always worth far more than litecoin, but the two coins saw their value rise and fall roughly in step with each other.

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[CoinMode]

This seems rather odd. We normally get a rise in value after a significant rise in hashing power. The litecoin net hashrate has been increasing, percentage-wise, at a faster pace than bitcoin this year, hasn't it? I could be mistaken, but this decoupling just doesn't seem to have any cause.

[TraderTimm]

Next litecoin difficulty is estimated LOWER than the prior one.

I don't see LTC making it out of the woodshed this year, if anything, its only plumbed new lows. How long until the single-digit funk makes everyone give up for a shiny, different alt-coin? That's the problem with not being first, you are really competing against all the other newer alts, not the top ranking coin.

[Dabs]

Also, you have to consider that Litecoin functions and operates almost the same as Bitcoin. It is still a Proof of Work coin. The faster transaction times (2.5 minutes versus 10 minutes) is just for the block, but we all know that any decent transaction broadcasted more than 10 seconds ago has already been seen by the entire bitcoin network and likely to get included in a future block, so the advantage of Litecoin is lost there.

[CoinMode]

Next litecoin difficulty is estimated LOWER than the prior one.

The current difficulty is LOWER than the last one right now, and we've seen multiple successive difficulty drops in litecoin difficulty before (as you can see below). However, that doesn't matter at all because the same pattern happens to bitcoin as well, just in a slightly different way. The difficulty usually goes up a tiny percentage for 4-5 changes, and then it goes up significantly for one or two difficulty changes before rising slowly again. In litecoin we see a 1-2 decreases in difficulty, then 1-2 slight increases, and the 1-2 increases in difficulty that are far bigger than any of the bitcoin changes. That is completely normal, and it doesn't signal this decoupling in price.

Here, look at the pattern for yourself:
Jun 13 2014    10,308    -4.23%    295,148 MH/s
Jun 09 2014    10,763    7.78%    308,182 MH/s
Jun 06 2014    9,986    9.54%    285,936 MH/s
Jun 03 2014    9,116    2.43%    261,030 MH/s
May 30 2014    8,901    4.10%    254,850 MH/s
May 27 2014    8,550    14.67%    244,803 MH/s <------HUGE increase in difficulty just after decoupling
May 24 2014    7,456    -5.36%    213,478 MH/s
May 20 2014    7,878    1.78%    225,561 MH/s <------THIS is where the decoupling begins
May 17 2014    7,740    6.14%    221,624 MH/s
May 13 2014    7,292    7.01%    208,806 MH/s
May 10 2014    6,815    -4.37%    195,132 MH/s
May 06 2014    7,126    -2.89%    204,045 MH/s
May 03 2014    7,338    3.46%    210,119 MH/s
Apr 29 2014    7,093    17.24%    203,086 MH/s
Apr 26 2014    6,050    15.18%    173,226 MH/s
Apr 23 2014    5,253    1.75%    150,399 MH/s
Apr 20 2014    5,162    -10.81%    147,817 MH/s <------NO decoupling happens here
Apr 16 2014    5,788    -1.82%    165,741 MH/s
Apr 12 2014    5,896    1.49%    168,809 MH/s
Apr 09 2014    5,809    -6.17%    166,322 MH/s
Apr 05 2014    6,190    7.73%    177,252 MH/s
Apr 02 2014    5,746    1.22%    164,536 MH/s
Mar 30 2014    5,677    4.72%    162,551 MH/s
Mar 26 2014    5,421    -7.10%    155,220 MH/s
Mar 22 2014    5,835    1.74%    167,086 MH/s
Mar 19 2014    5,736    11.11%    164,237 MH/s
Mar 16 2014    5,162    9.39%    147,815 MH/s
Mar 13 2014    4,719    -0.39%    135,131 MH/s
Mar 09 2014    4,738    20.81%    135,660 MH/s
source: https://bitcoinwisdom.com/litecoin/difficulty

There are many negative movements in difficulty during the entire history of litecoin. This is just a symptom of increased volatility that we have always seen in litecoin on every level, from price to trading volumes, and as we see here, net hashrate. You cannot point to the negative difficulty changes as a signifier of the uncoupling, because historically that has never been the case.

Now, let's look at net hashrate. This is the part that completely baffles me. Draw a line through those two curves. The moment that the slope of the hashrate for litecoin is at it's maximum, meaning the increase in hashrate is at it's fastest, is when the price starts to decouple. If the net hashrate is increasing FASTER than bitcoin, than why is the price going LOWER than bitcoin? I know that hashrates do not dictate price, but they usually a good indicator when we are not having a massive bubble.





Looking at the chart above, does anybody want to tackle this question? It seems as if litecoin should moving up in price very quickly in the near future. I am no expert at the technical aspects of the market, but if somebody out there can give us a better explanation, please do. Gold has no functional benefit over silver as a usable form of money or a store of value. The point that litecoin doesn't have increased functionality is not necessarily relevant. There seems to be something more complex than that going on. I can't wrap my head around it.

[frankenmint]

I think we can't assume the same level of acceptance velocity and widespread creation of infrastructure that BTC has amassed, period.  Now devs are looking to implement the infrastructure as a part of their newly created coin instead - rather than to create the infrastructure to support LTC. 

[LiteCoinGuy]

people said the same before Litecoin went to 45 USD , so be calm and mine Litecoin  

bitcoin is gold, litecoin is silver. 

[CoinMode]

people said the same before Litecoin went to 45 USD , so be calm and mine Litecoin  

bitcoin is gold, litecoin is silver.  

As one of the main ambassadors for litecoin on this website, it is a disgraceful to give such a shallow analysis of the situation, especially considering the information presented. That just cuts into your usernames credibility.

After looking over all of the numbers and the situation of the miners, it appears as though all of the old school miners started leaving around the time of price decoupling. All that remains in the litecoin space now are asic miners. Sometime in April or May, the use of video cards for litecoin mining became unprofitable. Perhaps some really old farms began slowly selling in order to leave the market entirely, and now it is up to just the asic mining crowd to continue this coins legacy.

Something just doesn't feel right about a coin where the only infrastructure that is being developed is the mining part of it. Why should this lead to a higher price or mass adoption in the future?

[TraderTimm]

Take a look at the market cap chart in the source article:



That divergence tells me that people are leaving LTC. Sure, the hashrate fluctuates, but I'll bet that it drops below 25k in the not-too-distant-future (It's 28,094 as of this post, with an estimated next diff of 27,342).

I think people are just getting bored of it, and won't be coming back for more. Each rebound has been sold into, aggressively, so this latest swing back up to 5.50's doesn't look like a breakout, just another bounce of the ball down towards the lower limits.

[RTRC]

I think Litecoin has already seen it's peak and is now on the other side of the mountain. Litecoin is the perfect example of what happens in the long term when the main structure of the coin is built to appeal to solely the crypto crowd.

The only thing the coin had going for it was that electricity bills would cost less. Also being the first coin on the new algo was great too. Once these new features became outdated, to coin is now slowly dying. Coins like Blackcoin and PND will be the only coins to survive. Their first step is reaching out to merchants and simplifing their coin so anybody can buy into it. Rather than trying to get a bunch of miners trying to force their coin up on the exchanges, they have their full focus on getting people to use their coins like we use centrelized money.

Continue to pray to your statistics to convince you that it's not a mistake to dump your coins, but in the end litecoin will be dead.

*cue angry litecoin holders*

[CoinMode]

I think Litecoin has already seen it's peak and is now on the other side of the mountain. Litecoin is the perfect example of what happens in the long term when the main structure of the coin is built to appeal to solely the crypto crowd.

The only thing the coin had going for it was that electricity bills would cost less. Also being the first coin on the new algo was great too. Once these new features became outdated, to coin is now slowly dying. Coins like Blackcoin and PND will be the only coins to survive. Their first step is reaching out to merchants and simplifing their coin so anybody can buy into it. Rather than trying to get a bunch of miners trying to force their coin up on the exchanges, they have their full focus on getting people to use their coins like we use centrelized money.

Continue to pray to your statistics to convince you that it's not a mistake to dump your coins, but in the end litecoin will be dead.

*cue angry litecoin holders*

Do you think there might be some large funds buying litecoin right now? It would be a very original product to offer litcoin ETFs as competition to bitcoin. The long history (in crypto-time) and the reliability of the network would be appealing to people looking to invest on the stock market. I haven't heard anything about this happening yet, but if the bitcoin ETFs become wildly popular, you can bet they will be racing to offer more products of a similar reputation to bitcoin, and that sure as Sherlock isn't going to be PND, Black, Cloak, PPC. They can't choose Ripple or NxT because the circulation of those coins is centrally controlled.

[No_2]

...Once these new features became outdated, to coin is now slowly dying. Coins like Blackcoin and PND will be the only coins to survive. Their first step is reaching out to merchants and simplifing their coin so anybody can buy into it...

Can you give me more info on what you mean by this?

Looking at the LTC and Blackcoin stats I can see:

	Difficulty	GH/sec
Blackcoin	1,028,196.6128	65,014.3760
Litecoin	28,093.8386	795.9243

From my superficial investigations isn't blackcoin scrypt based?

[bassclef]

Litecoin, I believe, has a significant advantage over other alts for a few reasons.

1. It has merchant adoption. Not nearly what Bitcoin has, but there are a number of retailers that accept it, including a giftcard service. No other coin can claim this.
2. The Chinese trade it on all three of their largest exchanges, and in much higher volumes than the US or Europe.
3. It has a head start. It is the #2 crytpo to market, and it separates itself from the rest of the pack by a large margin.

I realize #3 is psychological, but there's a reason psychology is a science. Humans tend to act in repeatable, predictable patterns. Crypto is not widely known nor is it well understood. Think of a new investor. When he sees that Litecoin is traded on all three major Chinese exchanges, that is a significant psychological effect. It gives the coin more legitimacy.

And let's be honest. If you've played the altcoin game you realize they are almost all pump & dump. Only a select few may make it out alive while the rest languish in virtual obscurity. Let's not delude ourselves into thinking otherwise.

[ErnieX]

Scrypt Asics are cause for hashrate increase.

[TraderTimm]

This rebound is like the April 12th surge, which ended and collapsed soon after. As for merchant adoption and exchanges trading it, that isn't a guarantee of anything - coins get delisted and merchants drop support, too. LTC would have to surge to 10 to even have a chance in hell, and I don't see that happening right now...

Just because it was the second widely-publicized alt-coin doesn't change the fact that its a fork, and still has to prove itself.