Simply Put: Is Investing in Litecoin Risky?
Litecoin is a peer-to-peer cryptocurrency network and open-source project that expands upon the original technology behind Bitcoin. Litecoin was among the 1st altcoins to enter the market and is currently the 5th largest cryptocurrency in the world in market capitalization. Litecoin offers a number of benefits for users over Bitcoin, including faster processing speeds, fewer opportunities for hackers and lower transaction costs.
While Litecoin does structurally improve upon Bitcoin’s technology, it still presents risks to investors. Litecoin’s rapidly aging infrastructure is no longer as unique as it was when the coin debut in 2011, with many altcoins now offering the same benefits and efficiency. Litecoin’s founder, Charles Lee, also sold his stake in Litecoin in 2017, which has affected investor confidence.
Where to Invest in Litecoin
Investing in Litecoin (or any other type of cryptocurrency) typically begins by opening an account with a crypto broker. A crypto broker offers you access to a trading platform where you can buy and sell cryptocurrencies by placing buy and sell orders. Like a stockbroker, your cryptocurrency broker will execute orders that you place on the platform on your behalf.
There are dozens of brokers offering access to the cryptocurrency market. Some of the factors you might want to consider when you choose a broker might include:
- Coin access: There are thousands of cryptocurrencies in existence, and no single broker will allow you to buy and sell all of them. It can be helpful to make a list of cryptocurrencies beyond Litecoin that you want to invest in to be sure that the broker you choose fits all of your needs.
- Trading platform: Some crypto brokers focus on providing a simple, streamlined ordering process, while others appeal to more advanced investors with charting platforms and analysis tools. Your experience trading will determine which type of platform is best for your needs.
- Fees and commissions: Most cryptocurrency brokers charge a fee or commission on each crypto purchase or sale you make. Research each broker’s fee schedule before you open an account, as fees can quickly cut into your profits if you’re a frequent trader.
Not sure where to begin your search? Consider opening an account with a few of our favorite beginner-friendly brokerages offering access to Litecoin.
eToro
eToro is a cryptocurrency trading platform that provides you with access to some of the world’s most popular cryptocurrencies. Trade Litecoin, Bitcoin, Ethereum and more with real-time data tracking and top-level security. You can even practice your trading strategy before you enter the market with eToro’s virtual trading wallet, which gives you $100,000 worth of fake money to trade with.
One of eToro’s most unique features is its spread-based commission schedule. eToro doesn’t charge a flat-rate percentage fee on your transactions, and unlike most other brokers, eToro doesn’t charge a fee on both buy and sell orders. Instead, you’ll pay a single spread no matter when you buy and sell.
Say eToro’s current spread for Litecoin is 1.90%. If you place 1 order to buy 100 Litecoins at $80 each, you’ll pay a fee of $152 (1.90% of your $8,000 order value). If the price of Litecoin then increases to $85 and you decide to sell, eToro will add a fee of $9.50 on your sell order. This is because 1.90% of your sell order value ($8,500) is $161.50, and you’ve already paid $152 in fees, so you must only pay the outstanding balance.
This unique fee schedule also works in reverse. For example, let’s say that you buy 100 Litecoin at $80 and pay $152 in fees. Then, the price drops to $75, and you decide to sell. In this case, you’d receive $9.50 back from eToro. This is because the spread fee only applies to the final price of the sell order. Also, 1.90% of $7,500 is $142.50, and you paid $152 when you placed your buy order — eToro will provide you with a credit for the difference ($9.50). This unique pricing model can help you manage losses more effectively.
Commissions
0.50% per sale
Coinbase
Coinbase is among the largest and most popular cryptocurrency investing platforms in the world, with 35 million verified users and 100 supported countries. With 39 cryptocurrencies available to Coinbase users in the U.S., it offers a diverse range of opportunities for investors. From major names like Ripple and Litecoin to smaller offerings like OMG Coin and Cosmos, there are plenty of opportunities to discover on Coinbase’s platform.
Coinbase is popular with beginners in particular thanks to the platform’s intuitive layout and simple account signups. Most users will be able to open an account in just a few minutes, and you can place your order with a few clicks from your home screen. Coinbase is also 1 of only a few brokerages that allows you to buy cryptocurrency using a credit card. This can be a great option if you aren’t comfortable linking your bank account to your Coinbase account directly.
After you make your purchase, you can track your holdings online — Coinbase will automatically create a graph that displays how your portfolio’s value is changing over time. The platform even allows you to schedule recurring deposits that allow you to automatically authorize investments on a schedule you set.
Interested in learning more about the crypto market before you invest? Coinbase’s unique “Earn” feature allows you to watch a few short beginner-friendly videos about the technology that supports each coin offered on the platform. After you learn, you can answer a few quiz-style questions on each crypto. For each question you answer correctly, you’ll earn a small amount of free crypto, which you’ll see in your account. Coinbase Earn can be an excellent way to explore coin offerings and start your portfolio without spending any money.
Advantages of Litecoin Investments
As among the 1st altcoins on the market, Litecoin typically holds its value better than newer altcoins with lower market capitalizations. Let’s take a look at a few of the advantages of the Litecoin network and technology.
- Lower transaction costs: Litecoin’s technology offers a number of improvements on Bitcoin’s infrastructure, including lower transaction costs. When you send Bitcoin from wallet to wallet, you lose a bit of crypto as the transaction is verified on the blockchain. Though Litecoin operates in a very similar manner, its network is more efficient than Bitcoin, which means that you lose less money when you initiate or receive a transfer. This is a major benefit for users who turn to cryptocurrency for its benefits as a secure money transfer system.
- Faster transaction speeds: Litecoin’s improved network doesn’t only extend to processing fees — it also enables users to send coins much faster when compared to Bitcoin’s blockchain. The average Litecoin transaction takes about 2.5 minutes to complete, while the average Bitcoin transaction closes in an average of 10 minutes.
- Less vulnerability to hacking attempts: Cryptocurrencies are most vulnerable to fraud and hacking attempts during transactions. Because Litecoin transactions take only a fraction of the time to close as a Bitcoin transaction, there is only a small window where hackers can attempt to double-spend. This makes Litecoin transactions less vulnerable to fraud.
- Open-source platform: Litecoin is built upon a naturally open-sourced fork of the BTC Core Client. This makes it much easier for developers to adjust the system and implement new features to keep up with the changing needs of the market. Its flexibility also allows developers to implement software security patches on a regular basis to keep up with hackers’ changing methods of attack.
Disadvantages of Litecoin Investments
Like any type of new technology, Litecoin also has drawbacks. Let’s take a look at a few of the cons that you should be aware of before you invest.
- Competing altcoins that offer similar benefits: Litecoin was very early to the market and among the first altcoins to expand upon Bitcoin’s network. While it still holds its own in speed and efficiency, many other more affordable cryptocurrencies operating on their own blockchain offer similar processing times and transaction security.
- Shaky faith in leadership: One of the 1st big draws to Litecoin was its development by Charles Lee, a former Google software engineer and a respected name in the cryptocurrency industry. Lee sold all of his stake in Litecoin in 2017, citing a perceived “conflict of interest.” This has called leadership’s faith in the coin and its future into question.
Investing in Altcoins
Though Litecoin does offer a few long-standing benefits over Bitcoin and is currently the 5th largest cryptocurrency by market capitalization, it’s important to remember that the crypto industry is still largely unregulated. If you decide to invest in Litecoin (or any other altcoin) always work through a trusted broker — and never invest more money than you can afford to lose.