Litecoin Price Drivers: How to Trade LTC

Created in 2011 by Charlie Lee (an ex-Google employee), Litecoin (LTC) is one of the most popular and oldest altcoins (alternative cryptocurrencies​​) in circulation. Let’s get a closer look at the factors that can influence the price of Litecoin and how to buy, sell and trade this popular cryptocurrency:

TL;DR

• Litecoin (LTC) is the second oldest successful cryptocurrency after Bitcoin (BTCUSD).
• LTC is among the most traded cryptocurrencies as of May 2024.
• Litecoin shares a part of Bitcoin history and is based on its original code source.
• As of May 2024, Litecoin is the 21st largest cryptocurrency in the world by market cap.
• To get Litecoin exposure, you can either buy and sell LTC on crypto-exchanges, mine LTC, or trade Contracts For Difference (CFD) based on the token.
• Before getting started with Litecoin CFD trading, traders should take into consideration the various factors that drive Litecoin prices.
• Forks, supply dynamics, blockchain advancements, and LTC blockchain & token adoption rate can be important internal factors within the Litecoin ecosystem that can influence the value of Litecoin.
• Overall market sentiment, Bitcoin’s performance, crypto regulations, and the trend of traditional assets can be considered the most influential outside influences on the Litecoin price.

What Is Litecoin?

Litecoin (LTC) is a type of digital currency also called cryptocurrency. Created in 2011, it was designed to be like Bitcoin, but with faster transaction times and lower fees, which makes the former a better option for everyday purchases compared to the way Bitcoin works. Like most cryptocurrencies, Litecoin uses blockchain technology, a secure system that allows for direct transfers between people without a bank involved.

If you'd like to get more details about Litecoin, read our article 'What Is Litecoin (LTC) & How Does It Work?'

What Influences the Price of the Litecoin (LTC) Token?

Before diving into Litecoin trading, traders should understand what factors can move its price. Here's a breakdown of some key influences:

Litecoin Halvings

Mirroring Bitcoin’s halving, Litecoin undergoes a halving event roughly every four years. This pre-programmed feature within the Litecoin blockchain reduces the block reward miners receive for verifying transactions and adding new blocks. This reduction in new LTC entering circulation can influence scarcity of Litecoin, which can in turn impact Litecoin prices.

Litecoin’s Network Technological Developments

Litecoin's price can be impacted by developments within the Litecoin blockchain and its ecosystem. This includes upgrades to the Litecoin core protocol that can introduce new features, improve scalability, and enhance security.

Bitcoin Performance

Litecoin's price often moves in tandem with Bitcoin, but to a lesser extent. Despite being the first altcoin to have been built on Bitcoin's codebase, Litecoin hasn't garnered the same level of mainstream attention as its predecessor. This difference in popularity likely contributes to Litecoin's price movements being less significant compared to Bitcoin's. Additionally, Bitcoin often acts as a benchmark for the market.

Regulatory Landscape

Since the cryptocurrency market is young, it is constantly evolving. Government regulations around the world can therefore impact the price of Litecoin, as they can influence trader confidence, their access to Litecoin and overall market sentiment.

Economic Conditions

Beyond the world of crypto, the broader economic climate can also influence Litecoin's price. Boom times, recessions, inflation levels, and the direction of global monetary policies can all indirectly affect trader behaviour and potentially push them closer to, or further away from, the cryptocurrency market, including Litecoin.

Market Sentiment

The overall mood, or sentiment, of the cryptocurrency market can play a role in shaping Litecoin prices. If there's a lot of excitement and hype surrounding Litecoin, it can trigger a wave of speculative buying, pushing prices even higher. However, if the market becomes fearful or uncertain, a wave of selling can erupt, leading to price declines. Mainstream media coverage of cryptocurrencies is usually a major tool to influence public perception and market sentiment.

How to Buy and Sell Litecoin

Litecoin enthusiasts have three primary avenues for gaining exposure to the Litecoin market.

• Buying LTC Tokens: The most straightforward method involves purchasing LTC directly on cryptocurrency exchanges. These platforms allow users to buy and sell Litecoin using various traditional payment methods or by exchanging other cryptocurrencies like Binance Coin (BNB) and Polygon (MATIC) for instance.
• Mining Litecoin: For those with a more technical background and access to specialised hardware, mining Litecoin presents another option. Once they receive LTC as a reward for their mining efforts, traders can then sell them against fiat or other cryptocurrencies.
• Contracts for Difference (CFDs) on Litecoin: They offer a way to speculate on Litecoin’s price movements without actually owning the underlying asset. This method allows traders to potentially profit from both rising and falling LTC prices, but it also carries the risk of magnified losses due to leverage.

The Advantages of Using CFDs to trade Litecoin

If you’re wondering if you should trade cryptocurrency CFDs with Litecoin, let’s have a look at some of the advantages of CFD trading:

No Ownership of Litecoin tokens

Unlike traditional Litecoin ownership, CFDs on LTC track the price movements of Litecoin without requiring actual ownership of the underlying cryptocurrency. This allows traders to speculate on LTC's price fluctuations without the need to register on a specific exchange platform, purchase LTC tokens, or deal with the complexities of secure storage.

Short-selling Possible

CFDs on Litecoin also allow traders to short-sell the token if they anticipate that LTC prices are likely to fall in the future. In addition to being able to capitalise on upwards movements, CFDs give the opportunity for traders to exploit situations where the Litecoin prices decrease.

Small Initial Deposit

Because CFDs are margin traded, traders can get into Litecoin trading with a limited initial capital.

Online Diversification

Beyond popular altcoins like Litecoin, Axie Infinity (AXS), Avalanche (AVAX) and Tron (TRX), CFD providers like Plus500 typically offer a vast selection of financial instruments, empowering traders to capitalise on diverse trading opportunities within a single online trading platform and create a diversified portfolio.

The Risks of Using CFDs to Trade Litecoin

Trading Litecoin with CFDs can be a rewarding experience, but it's also important to be aware of the risks involved, as they can lead to significant financial losses:

Leverage

Leverage can amplify your returns, potentially magnifying your profits when the market moves in your favour, but it significantly amplifies losses during unfavourable market conditions.

Cryptocurrency Volatility

The cryptocurrency market is still young and evolving, making it inherently unpredictable. Unlike traditional assets with more stable prices, Litecoin can experience significant price fluctuations in a short period. This volatility combined with CFD leverage can lead to substantial losses if you're not prepared.

Emotions

Bitcoin's volatility can be a recipe for emotional trading, especially for active CFD traders. Short-term CFD trading presents its own short-term trading challenges that require discipline and a well-defined strategy. The rapid price swings in Litecoin can amplify these challenges, making it even more crucial to stay objective and avoid impulse decisions by controlling your emotions when trading.

How to Trade CFDs on Litecoin with Plus500

Many traders use two main tools to analyse Litecoin: technical analysis and fundamental analysis.

Mastering technical analysis means that traders learn to focus on historical and current price action on trading charts to identify potential future price movements of LTC. Fundamental analysis, on the other hand, focuses on the underlying factors that can influence Litecoin's intrinsic value to determine if the current price is under or overvalued.

From tools to identify big technical triggers such as technical indicators to a comprehensive economic calendar and relevant News & Market Insights, Plus500 offers various tools for each type of trader.

For those who prefer a diversified approach, Plus500 also provides an index that tracks the performance of multiple cryptocurrencies simultaneously, Crypto 10 (Crypto10). This can be a useful tool for gaining exposure to a broader segment of the cryptocurrency market.

So, how to trade cryptocurrencies with Plus500?

You can open a CFD trading account on Plus500. Before trading with real funds, you can use a demo account with virtual money. Then, you can switch to a real CFD trading account once you’re ready.

Once your account is funded, go to the trading platform and look for ‘LTC/USD’ in the cryptocurrency category. Alternatively, you can type ‘Litecoin’ in the search bar. You can then set up your buy or sell order according to your trading plan and risk management rules.

Conclusion

As of May 2024, Litecoin (LTC) remains a well-established and popular cryptocurrency. With its price movements being influenced by various internal and external factors, creating potential trading opportunities for crypto-savvy traders, CFD (Contract for Difference) trading is one popular way to speculate on LTC's short-term price movements. It allows traders to leverage technical or fundamental analysis to gain exposure to LTC's price fluctuations, without owning the underlying cryptocurrency.

Armed with this knowledge of LTC price drivers and Litecoin CFD trading options, you can get started with crypto CFD trading on Plus500.

Litecoin Price & Trading - Frequently Asked Questions (FAQs):

Is trading Litecoin risky?

Cryptocurrencies are highly volatile and speculative by nature, which makes them risky assets to trade. While trading Litecoin can be risky, if you follow your trading plan and implement money and risk management tools, you may be able to reduce your level of risk when trading LTC.

What drives Litecoin prices?

Similar to most cryptocurrencies, Litecoin (LTC) experiences price fluctuations driven by a mix of internal and external factors. Internal factors specific to the Litecoin blockchain and network might include hard forks, circulating supply vs. capped supply, blockchain updates, and the LTC adoption rate. Overall crypto market sentiment, the evolution of Bitcoin price, the performance of other traditional assets, as well as crypto regulations are among the major external factors influencing Litecoin prices.

Litecoin price prediction: Should I buy Litecoin?

As an established cryptocurrency with a reputation for faster transaction times and lower fees compared to Bitcoin, Litecoin has carved out a niche in the crypto world over the years. However, like any cryptocurrency, LTC is a volatile asset which can be risky to trade, as it involves a significant risk of loss. There's no guaranteed path to success in the cryptocurrency market, so it’s important to only trade what you can afford to lose and to make sure that trading Litecoin fits your trading profile.

How can I trade Litecoin?

Retail traders often turn to Contracts For Difference (CFDs) to trade popular cryptocurrencies like Litecoin (LTC) over the short-term because this allows them to take advantage of both rising and falling prices without having to own and secure any LTC tokens. Additionally, CFDs rely on leverage trading, which means that potential profits can be magnified. However, it also means that potential losses are also amplified.