What is Litecoin?
Litecoin is a cryptocurrency that is a direct competitor to Bitcoin in that it supports cross-border payments at very little cost to its users. It is sometimes referred to as the ‘silver’ to Bitcoin’s ‘gold’. Litecoin claims faster transaction confirmation times than Bitcoin. Litecoin sets what are called ‘proof of work’ tasks to computers. This means that they have to solve complex problems as part of the encryption processes that support blockchain.
Owners of the computers that work on blockchain problems can be paid in Litecoin. It shares many of the same characteristics as Bitcoin, but its developers claim it is more efficient.
The big difference between the two is that Litecoin has been set up to be harder to mine at scale and is faster to process transactions.
How to trade Litecoin
Litecoin has been designed to make it very easy to transact and many people are using Litecoin to make international payments already. It can still be cumbersome to trade this cryptocurrency on a regular basis using an exchange which is why some investors choose to trade the price of Litecoin using CFDs instead.
Litecoin has a real-world value in currency, which will go up and down over time. This is the amount of another established currency (for example USD) one Litecoin unit can be exchanged for.
- No need for a wallet: take advantage of both rising and falling Litecoin prices without the need for a wallet
- Volatility: react more quickly to changes in price without owning Litecoin
- Leverage: trade Litecoin with only a small initial investment
Be aware, however, that using leverage to trade Litecoin means you will be more exposed to changes in the price. Make sure that you use stop losses and take profit orders to protect yourself against losses and secure your potential profits. Make sure you are aware of what your total exposure to the Litecoin price is at all times.
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Buying vs trading Litecoin
Buying Litecoin on an exchange requires the use of specialist cryptocurrency platforms and a cryptocurrency ‘wallet’ to store your currency in. Trading Litecoin using CFDs allows you to react even more quickly to price changes and take advantage of short-term volatility. You don’t need to own Litecoin to be able to trade its price.
Another benefit of trading Litecoin via CFDs is having a market maker taking the other side of the trade, meaning market depth is less of an issue than trading on an exchange.
Factors impacting Litecoin
Litecoin is similar in many respects to Bitcoin. Many experts see it as Bitcoin’s little brother, but with the potential to eclipse Bitcoin because of it’s more efficient transaction system.
A new cryptocurrency called Litecoin Cash was launched in February 2018. This uses the same algorithm as Bitcoin rather than the Litecoin one. Litecoin Cash is not affiliated with Litecoin, but events like this can create uncertainty and confusion around a cryptocurrency, undermining confidence and sometimes driving the price down.
Like other cryptocurrencies, Litecoin’s price is also driven heavily by news flow, rumours and the statements of its global community.