A New Report By Multicoin Capital Suggests Litecoin To Be Significantly Overvalued

According to cryptocurrency hedge fund Multicoin Capital, even at that mark, Litecoin is “significantly overvalued.” Multicoin, which is short LTC, lays out its bear case for the asset in a new report, authored by managing partner Tushar Jain.

The Texas-based fund, via Jain, argues that LTC faces a variety of negative catalysts, with no bull case to compensate.

To begin with, Jain alleges that Litecoin’s 2017 bull run came predominantly as a result of naivety among retail investors and immaturity in the cryptocurrency market. As evidence, he cites the fact that LTC was the “least expensive per-unit asset on Coinbase,” one of the most popular trading platforms among inexperienced cryptocurrency buyers — the most likely group to not recognize that you can purchase fractional coins.

The coin no longer bears that distinction, though, since Coinbase listed Ethereum classic (ETC) in August and has further announced plans to consider listing a variety of other assets, which promises to diminish the impact that a Coinbase listing provides for an individual cryptocurrency.

Next, Multicoin argues that the Litecoin Foundation is in a poor financial situation to continue operating effectively, holding only about $322,000 in assets — with 82 percent of those funds denominated in LTC.

Furthermore, the firm says that LTC does not have a unique development roadmap, which helps explain the dearth of LTC GitHub commits, with the majority of LTC updates being forked from Bitcoin Core. With these factors in mind, Jain, like several other analysts, called founder Charlie Lee’s decision to sell his entire LTC stake a “red flag,” regardless of his stated intentions in so doing.

Multicoin claims that the litecoin price will not be able to overcome the significant selling pressure it will likely face in the near future.

To wit, the report notes that Bitmain — the most valuable cryptocurrency company — owns over 1 million LTC, according to a leaked investor deck. The firm, led by CEO Jihan Wu, has been an outspoken supporter of bitcoin cash (BCH), which — like litecoin — aims to become the internet’s “digital cash.” Consequently, Multicoin believes that Bitmain will eventually dump the LTC, either to provide BCH with price support or to force litecoin further into bearish territory.

Meanwhile, Multicoin believes the supposed bull cases for litecoin — e.g. that it is an ideal medium of exchange and/or a testnet for the Bitcoin network — fail to stand up to scrutiny.

Writing in the firm’s report, Jain takes aim at the narrative that if bitcoin is gold, then litecoin is silver. Jain says that this is a false analogy because, unlike physical gold, bitcoin will likely in the future become a viable medium of exchange through the adoption of technologies like the Lightning Network (LN).

“Comparing digital assets to precious metals may be a nice analogy, but it does not have any substance. The value of the ratio of silver-to-gold is based on the idea of price-to-weight ratio. A lower price-to-weight ratio makes payments for smaller purchases more convenient. Digital assets are weightless, and thus the same analysis cannot be made.”

Summarizing the firm’s position, Multicoin says that while LTC may be historically significant, its founding vision has become obsolete and has not been replaced by a viable roadmap. Jain finishes his report by saying:

“Hovering at approximately $50, we believe LTC is significantly overvalued. Given the lack of a viable investment thesis, nonexistent positive catalysts, and strong negative catalysts, we expect LTC to continue to substantially underperform the crypto market.”

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