Litecoin (LTC) is ‘significantly overvalued’, according to a report published by Texas-based crypto hedge fund Multicoin Capital, which is short LTC.
In the report, managing partner Tushar Jain set out a comprehensive bear case for LTC, a withering assessment of the cryptocurrency, the Litecoin Foundation, and its prospects for the near future.
The report comes at a time of low Litecoin prices, already down from highs of $358 to just under $55. However, with Multicoin heavily shorting LTC, Jain predicted the market has yet to see anything like its bottom. In particular, he cited concerns over founder Charlie Lee distancing himself from the project, calling his decision to sell his entire stake in LTC a ‘red flag.’
“Despite [Charlie Lee’s] intentions, a misalignment of incentives now exists that decreases his motivation to continue development and add value to the protocol,” Jain wrote. “To better achieve this goal, we would have liked to see him time-lock his holdings or use them to fund further LTC development.”
The report continued to say Litecoin would face a struggle to overcome sell pressures, particularly with giant Litecoin bear Bitmain thought to be looking to offload as many as 1 million LTC in the near future, at a time when the cryptocurrency is already under heavy pressure.
Jain said that Litecoin was also struggling from a lack of adoption amongst merchants, the majority of which only support LTC as part of a basket of cryptocurrencies supported by their payment processor.
He explained, “Litecoin’s adoption is generally shown using qualitative evidence of merchants accepting Litecoin. Merchants accepting Litecoin also generally accept a basket of other crypto-assets because crypto payment processors such as BitPay support many cryptocurrencies. Merchants are not explicitly choosing to support Litecoin payments. Rather, they’re electing to accept payment in any crypto, of which Litecoin is just one.”
Concluding his negative outlook, Jain summed up Litecoin as a ‘relic of the pre-smart contract age.’
“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,” Jain stated.
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