Litecoin's Scarcity of Supply Is an Appealing Reason to Diversify Your Crypto Portfolio

A lot of people are at a loss regarding the supply capitalization of Litecoin. Many questions abound over this topic as several investors seek to know if Litecoin has a supply capitalization as Bitcoin does. 

One of the earliest altcoins to emerge is Litecoin; launched by Charlie Lee in 2011. This crypto bears similarities with Bitcoin, and has seen a rapid price increase in 2021 as more people began investing in it. In May 2021, it hit a price high of over $380.

In comparison to fiat currencies, cryptocurrencies like Bitcoin usually have a fixed hard cap placed on their total supplies. However, what is Litecoin's position in following the footsteps of Bitcoin by placing a maximum threshold on its supply limit? This is in contrast to cryptocurrencies like Dogecoin which have unlimited supply capitalizations.

The Truth About Litecoin's Supply Capitalization

Litecoin has a maximum supply capitalization of 84,000,000 LTC. This supply capitalization is four times the supply capitalization of Bitcoin; which is pegged at 21,000,000 BTC. The moment the 84,000,000 LTC is mined, there will be no more LTC coming into existence.

There is no white paper explanation for this supply cap. Nevertheless, there has been little insight into the rationale behind a lot of Litecoin's features, such as its supply limits. Litecoin was originally interested as a 'lite version of Bitcoin. It was something like a silver analogy and a considerably cheaper alternative than Bitcoin but has more coins and is more affordable to investors. In order words, it could be regarded as silver, where Bitcoin is regarded as gold.

This analogy means that Litecoin had to follow Bitcoin's footsteps by putting a supply capitalization in place, and at the same time, quadruple the total capitalization of Bitcoin. In addition, the current price of Litecoin gives it a completely diluted market capitalization of $14,028,000,000-this is however not stable as fluctuations in Litecoin's price result in changes to it.

Litecoin's Scarcity of Supply

One of the major reasons for the constant buoyant price of Litecoin throughout this year is the scarcity of this altcoin. Litecoin is one of the cryptos with the shortest supply range. In the same vein as Bitcoin and other cryptocurrencies, there is a limited number of Litecoins that will ever be mined and sent into the public domain.

The overall number of LTC to be mined is pegged at 84,000,000. This figure is four times that of the 21,000,000 Bitcoin that would ever be mined. As of June 2021, over 66 million Litecoin were reportedly in circulation. This implies that there are only about 17 million Litecoin available for mining before the altcoin reaches its supply capitalization. The 66 million LTC represents a whopping 80% of the entire capitalization, and this suggests that it won't take long before all the coins are available to the public.

Litecoin Scarcity: Why You Should Diversify Your Portfolio

Compared to most traditional assets, the cryptocurrency market is considerably volatile and the prices can shift without warning in various directions many times a day. This can be to the advantage or disadvantage of investors. Volatility increases the chances of incurring losses in the same way it increases the chances of making a profit. It is not uncommon for prices of coins to suffer as much as a 50% drop in just a few days. As a result, investors who heavily invest in a single coin would experience an immense loss that could negatively affect their portfolio's worth.

In order to reduce their exposure to such high levels of risks, the best thing to do is to diversify your crypto investment portfolio access a wide range of digital assets. This essential investment strategy plays a crucial role in reducing the level of losses that would be incurred when a market downturn occurs. Diversifying your crypto investments means you are unlikely to suffer a severe loss should a significant price drop occur to one of the coins.

Conclusions

The scarcity of Litecoin's supply makes it a valuable digital asset going forward. However, due to the inherent nature of market volatility, investors should diversify. One of the many ways this can be done is through bitcoin to litecoin exchange. Diversity does not focus on a particular digital asset, as a result, the main aim is to ensure that investment in a particular cryptocurrency does not significantly outweigh your investment in other cryptocurrencies.