Ok, it may not be (get your pinky ready) $100,000,000,000, but with prices of litecoin now near $50 the currency’s market cap has breached $1 billion. It was the one ‘billy’ amount back in March that really got media attention all over bitcoin. Will the same occur for litecoin?
Back when bitcoin broke the $1 billion barrier, the theory was that once it achieved that mark it got the attention of the larger venture funds and investors. While a multi-million dollar business is a dream for the rest of us, when you are making lots of bets on startups which will mostly all fail, VCs need those one or two huge wins to come out ahead. Therefore, more than just eyeing individual companies, they look at an entire market’s potential. For bitcoin, the potential lies in activities such as fees collected on exchanges, interest bearing deposits, and handling merchant payment processing. If bitcoin were to be able to grab even a small percentage of the existing payment processing in online commerce, the digital currency has the potential to create many billion dollar companies.
Litecoin: 2nd place to Bitcoin is Both Good and Bad
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In terms of litecoin, its meteoric rise being much the result of bitcoin’s acsent is both a blessing and a curse. On one hand, litecoin is benefitting from overall demand in digital currencies as speculators search for that next ‘big thing’. On the other hand, in terms of actual infrastructure investment and business creation, litecoin may have a hard time getting out of bitcoin’s shadow. For example, merchant have more incentives to provide payments in the currency with the most users and buying power. While it may not cost much to offer payments in multiple digital currencies, why bother the confusion if bitcoin represents probably 95% of the market? In addition, looking at it from the side of VCs, existing infrastructure for bitcoins when they hit $1 billion market cap was much greater than that of present day litecoin. At that time in March, MtGox, Bitstamp, Bitpay, and others were firmly established. At this point though, other than a Bitfinex and BTC-e, and a few much smaller exchanges, it is slim picking in who offers LTC/USD conversions.
Wildcard: Charlie Lee and Coinbase
One item that litecoin does have in its favor is that Charlie Lee, the digital currency’s founder, currently is employed by Coinbase, the US based and venture funded bitcoin exchange and merchant solutions firm. While Coinbase hasn’t mentioned plans to add litecoin exchange and processing, employing its founder does give them critical insight into the currency. In addition, as a firm focused on providing merchant payment services, cross currency wallets would seemingly be near the top of the list of their plans.
Overall, while litecoin may be currently overshadowed by its bigger brother (currently sporting a market capt of $12 billion), it is doing a great job of blazing its own path while being in a great position to take advantage of existing infrastructure that was created for bitcoin.