On Wednesday (April 3), Michael Novogratz, a former Goldman Sachs partner, as well as Founder and CEO of crypto-focused merchant bank Galaxy Digital, said that he could not understand Litecoin’s price rally since he feels that Litecoin (LTC) is significantly overvalued.
Novogratz’s comments on Litecoin came on the day that Litecoin reached its highest price ($96.39) since 14 June 2018. They were delivered via the following tweet:
Gold has an $8.5 trillion dollar market cap. Silver is $15bn That is .17%. $BTC has a $90bn mkt cap. $ltc is $5.7bn which is 6.4% of $BTC. Silver is at least useful for industrial production. $ltc is a glorified test net for $btc. I don't get this rally. Sell $ltc buy $btc.
— Michael Novogratz (@novogratz) April 3, 2019
As most of you probably know already, Litecoin creator Charlie Lee has often said that if Bitcoin is digital gold, then Litecoin should be considered as digital silver. For example, this is a tweet sent out by Lee in May 2017:
Solution: silver to bitcoin’s gold
— Charlie Lee [LTC⚡] (@SatoshiLite) May 15, 2017
What Lee says makes sense since the two cryptocurrencies share the same basic philosophy, but Bitcoin is much harder (i.e. more expensive) to mine.
So, what Novogratz is saying is that since silver’s market cap is 0.17% of gold’s market cap, it does not make much sense that Litecoin’s market cap ($5.5 billion at the time) is 6.4% of Bitcoin’s market cap ($90 billion at the time). Novogratz feels that since Litecoin is just a “glorified test net” for Bitcoin, such a high valuation is not deserved, and that’s why he is confounded by Litecoin’s strong price rally (over the past several weeks), which started on February 8. That’s why he is recommending selling Litecoin and buying Bitcoin.
Novogratz’s use of the words “glorified test net” seems to suggest that he has been influenced by Tushar Jain, a managing partner at crypto hedge fund MultiCoin Capital Management. As CryptoGlobe reported, back on 14 September 2018, Jain published a blog post titled “Debunking Market Narratives: Litecoin ($LTC) Edition” that claimed that the most popular narratives used for defending Litecoin all seem inaccurate, and called LTC (even at around $50) “significantly overvalued.”
In that blog post, Jain said that he believed that Litecoin is “a relic of the pre-smart contract platform crypto ecosystem,” that its fundamental value is a lot less than its current price (around $50 when the report was written), and that the only things propping up its price are “outdated narratives.”
With regard to Litecoin’s use case as a testnet for Bitcoin, Jain wrote that this was not an “investment thesis”, but simply “a false narrative that has emerged most likely due of the lack of any other viable alternative” He went on to say:
“To make the argument that Litecoin should be valuable as Bitcoin’s testnet, that means that Bitcoin holders must voluntarily choose to sell some Bitcoin in exchange for Litecoin in order to support the testnet to the tune of $3B. This is a ridiculous assertion.”
It looks like Jain’s feelings about Litecoin have not changed since the day after Novogratz’s tweet, Jain sent out the following tweet:
Litecoin isn't the silver to Bitcoin's gold.
Litecoin is the fools' gold. https://t.co/bmfwYAfRi4
— Tushar Jain (@TusharJain_) April 4, 2019
However, not everyone agrees with Novogratz’s assessment of Litecoin. One notable example is Mati Greenspan, Sensior Market Analyst at social trading platform eToro, who sent out the following tweet to defend Litecoin:
LTC is literally silver to bitcoin's gold. It's far more useful for transactions as it's cheaper and faster than BTC.
Feel free to review our in depth research paper: https://t.co/tk2Q1lxFve
— Mati Greenspan (@MatiGreenspan) April 3, 2019
Another dissenting voice was that of Peter McCormack, the host/producer of the very popular “What Bitcoin Did” podcast:
Using this analogy for multi million dollar bets is concerning. The crypto markets are highly correlated. Alts tends to be leverage BTC plays.
— Peter McCormack (@PeterMcCormack) April 5, 2019
Despite the negative views of Jain and Novogratz toward Litecoin, in fact, it’s year-to-date performance (USD) versus Bitcoin is very impressive: (at the time of writing) Litecoin is up 189.49% and Bitcoin is up 34.2%.
At press time, according to CryptoCompare, LTC is trading at $87.54, down 0.79% in the past 24-hour period: