Key Insights
- Litecoin has been the subject of increasing speculation about an incoming spot ETF.
- Over the last year, its odds of approval have dwindled on PolyMarket from a high of 75% to 27% where it now sits.
- Analysts are optimistic about its approval though, because of Litecoin’s close association with Bitcoin.
- Litecoin could be on its way to doubling by April of this year, according to insights from CoinCodex.
The crypto market has been buzzing with excitement ever since the US Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETFs in January 2024.
The same happened with the spot Ethereum ETFs in June of the same year, despite the lackluster performance of the cryptocurrency ever since.
This time around, however, the same enthusiasm hasn’t extended towards Litecoin, which is now going through a rocky start to the year.
Litecoin’s Price Struggles
According to data from CoinMarketCap, the Litecoin price has been impressive over the last 24 hours before writing, with a 4% price increase.
However, the cryptocurrency evidently struggles in the long-term timeframes, after declining by 15% over the last month.
Interestingly, this drop coincides with a broader drop in the altcoin market, with many of them retracing all the gains they made in the previous year.
But what is causing Litecoin’s underperformance in particular?
According to analysts, the ongoing Litecoin price drop may be due to the dwindling odds of the SEC approving a spot Litecoin ETF in 2025.
Speculators aren’t so optimistic either, with the probability of a Litecoin ETF approval on PolyMarket having declined to 27% from an earlier high of 75% only last year.
Falling Odds for Litecoin ETFs
The idea of a spot Litecoin ETF has run hot in the crypto industry for nearly a year now.
The initial optimism saw these odds rise as high as 75% in late 2024 and have declined steadily in recent months.
However, despite these setbacks, experts are still optimistic.
One of these is senior Bloomberg ETF analyst Eric Balchunas who argued in December of last year, that the SEC might be inclined to approve a Litecoin ETF.
Litecoin is a hard-fork of Bitcoin after all.
According to Balchunas, the market could soon see a wave of new spot ETFs for various cryptocurrencies, not only Litecoin.
He believes that the Litecoin ETF market will follow Bitcoin and Ethereum, considering Litecoin’s close association with Bitcoin.
Balchunas also highlighted other cryptocurrencies like Hedera, XRP and more as possible candidates for approval.
However, while all of the above is encouraging, XRP in particular is still under investigation by the SEC over its classification as a security.
Institutional Interest in Litecoin ETFs
So far, Canary Capital is the only company to have applied for a Litecoin ETF.
Analysts believe that Grayscale (which holds over $215 million in its Litecoin Trust) could be willing to convert the trust into a spot ETF.
However, even if approved, there are concerns about the success of a Litecoin ETF.
Institutional interest in Bitcoin has been moderate so far. On the flip side, the Ethereum ETFs have struggled since launch, with the Bitcoin ETFs representing only 5.7% of the coin’s market capitalization and $107 billion in assets.
The Ethereum funds, on the other hand, hold significantly less with $11.6 billion, or 2.96% of the total market cap.
Litecoin on the other hand, is currently ranked the 22nd largest cryptocurrency by market cap.
It has a market cap of $7.7 billion, and even a 20% ETF allocation of this total is unlikely to make much of a difference, compared to larger cryptocurrencies.
Litecoin Price Prediction And Broader Market Implications
The SEC has received a barrage of applications for ETFs and similar products tracking crypto.
Major players like Solana and XRP are also running for ETF approvals, with analysts predicting a $3—$6 billion allocation for the Solana ETFs alone within a year of approval.
In terms of price predictions, insights from CoinCodex indicate that the cryptocurrency has a bright future ahead.
The resource’s Litecoin price prediction shows that the cryptocurrency will soar by nearly 80% and hit a high of $174 in the next three months.
Litecoin is expected to continue further upwards from here and more than double to $240 by April of this year.
However, while the crypto industry remains optimistic about expanding its ETF offerings, there are still certain challenges to worry about.
Some of these include the ongoing regulatory uncertainty, coupled with lukewarm institutional demand for the existing crypto ETFs.
Litecoin’s status as a Bitcoin fork could aid its ETF approval. However, some possible hindrances include its smaller market size and its declining popularity.
