Bitcoin, the top bearer asset, is poised to reclaim the attention it relinquished to other tokens over recent years. The enthusiasm Bitcoin lost to inferior assets during crypto winter is set to return, German investment bank Berenberg said in a report last week.
But with the Litecoin halving coming up in 90 days, is there space for digital silver to close the gap?
As US regulators are on the war path against the industry, “almost every token appears at risk of being branded a security and becoming subject to an enforcement action,” the report said.
Bitcoin is the exception, “which by virtue of the decentralisation stemming from the design of its blockchain protocol, the Securities and Exchange Commission and other regulators characterise as a commodity rather than a security,” wrote analyst Mark Palmer wrote.
The bank interprets Bitcoin’s price increase in the first quarter of 2023 as an indication that “more investors are recognising it as a sensible alternative not only among crypto tokens, but also within a global financial context.”
The ongoing banking crisis in the US worsened last week, with First Republic Bank’s (FRC) share price plunging over 50% on April 25th as it lost over $100 billion in customer deposits. FRC shares ended up closing at $3.41, an 80% weekly drawdown.
The US banking crisis and concerns over the Fed’s interest-rate policies have led some countries to manoeuvre away from the US Dollar, which has fuelled speculation about possible de-dollarisation, as the report said. This turn of events “could help to highlight bitcoin’s value proposition.” While the Dollar is the reserve currency, de-dollarisation is the talk of the town nowadays. Countries are creating bi-lateral trade deals in rebellion against the greenback’s hegemony.
Billionaire investor Stanley Druckenmiller has also bet against the US Dollar, saying he’s “comfortable” being “short the US Dollar”, noting that the 2-3 year upward run has been a long currency trend that’s reached its end.
Digital commodities that have withstood the test of time are numbered. Besides Bitcoin, the only digital commodity and bearer asset which has retained its top 20 crypto position for over a decade is Litecoin, referred to as digital silver. Currently ranked as the 13th cryptocurrency on CoinGecko, Litecoin has climbed up the ranks as capital flight from thousands of coins and tokens move into digital commodities following the rampant fraud seen in 2022.
Alongside Bitcoin, Litecoin’s hashrate hit time highs in early 2022 reaching 900TH/s in April. The crypto appears to have attained digital commodity status in the eyes’ of market participants and US regulators.
Bearer asset halvings
Meanwhile, the Litecoin halving is scheduled for August 2nd, 2023. Litecoin is a halving cycle behind Bitcoin, so this will be the third halving event for the underdog bearer asset. Litecoin holders speculate that since Litecoin’s network effects lag those of Bitcoin, partly due to this halving event disparity, today’s value-price mismatch is set to be corrected in the months ahead as supply constraints kick in.
Similarly, Bitcoin’s halving date is scheduled for May 2024. Per the report, the event is another catalyst for the cryptocurrency, which noted that “if history is any guide, then bitcoin could rally ahead of and after this much-anticipated halving.”
“The utility of the Bitcoin blockchain has been highlighted by the increasing traction gained by the Lightning Network,” the authors added. The Lightning Network is a second layer solution built on top of the Bitcoin blockchain. It uses user-generated relay channels to make transactions more efficient.
Meanwhile, Litecoin developers have focused on delivering wallet features such as native privacy solutions though Mimble-Wimble Extension Blocks (MWEB). The second layer solution masks wallet fund amounts and increases the cryptocurrency’s fungibility, an essential property of good money.
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