What will happen to Litecoin post Aug 1?
For everyone who has been following the drama in the cryptography world, Aug 1 will be a big day for Bitcoin (BTC) will go through a ‘hard-fork’ where a new chain — Bitcoin Cash (BCC) will split and every holder of BTC will receive their equivalent of BCC.
However, due to this ‘free’ coin give-away, alt coins has taken a beating for the past few days as holders of coins such as ETH, LTC, etc. have converted their coins to BTC with the hope of receiving BCC on 1st Aug and immediately selling them on supported exchange for free cash.
While the true value of BCC is debatable (it is currently traded on as a futures contract and the value has been hovering around $300–400 per coin), we can assume that most people will simply sell it off at the very first instance to cash in and wait for a big drop to re-buy cheaply for speculation. This is especially true since it is widely speculated that less than 5% of mining capacity is expected to be dedicated to BCC post-fork thus it will be silly to hold on to the coin while the majority of the holders will be dumping it.
So… that begs the question of whether people will start rotating back to ALT coins post Aug 1 and how things will turn out?
One of the possibility is for ALT coins to return to the pre-BCC announcement levels. The argument here is that ultimately, people will have more trust in ETH, LTC than BCC and thus prefer to hold those well established coins as oppose to BCC.
However, during this period, a few things are also happening concurrently:
- BCC are not traded in many of the popular exchanges around; thus people will have transfer them to a limited number of exchange to convert them to either BTC or other ALT coins
- During the same period, most exchanges are also suspending BTC from transfer or withdrawal thus there’s a need to use another coin to move things around
With those 2 conditions above, it is not unreasonable to expect there will be a frantic rush to convert those funds to coins like LTC or ETH so that they will be moved off from BCC exchanges to either hot or cold wallet or a different exchange where the owner is more familiar with.
When that happens and buying momentum of ALT coins pick up, and price volatility is expected to spike up. Due to the conversion for ALT coins for the past week, a lot of ‘weak’ hands have already been shaken out and it is likely that holders of these coin are likely to hold on to their coins and not sell them off at a loss or small profit — they are expecting it to moon. As such, there is a possibility that there will be a sharp increase in prices across all the popular ALT coins across the board.
How much will it spike up and will it return to it’s original level pre-BCC? Only time will tell but I am betting that we will sell a huge bump across all ALT coins during that period and a huge dump of BCC post Aug 1. By how much? only time will tell!
Disclaimer: I am holding a position in LiteCoin.