Which Digital Currency Will Be the Next Bitcoin?

Litecoin is benefiting from bitcoin’s surging popularity

Litecoin, launched in 2011, was the first major alternative version of bitcoin.
Litecoin, launched in 2011, was the first major alternative version of bitcoin. Photo: Manuel Romano/Zuma Press

Investors in cryptocurrencies are hoping lightning strikes twice, as the outsize recent gains in bitcoin are encouraging migration to several digital relatives.

So-called “altcoins”—alternative versions of bitcoin—have been rising along with bitcoin itself. Most prominently, a digital currency called litecoin surged about 60% last Wednesday alone, trading at a record-high $341.72, according to coinmarketcap.com.

It began the month at just $88 and the year at $4.33. While bitcoin is up more than 1,600% this year, litecoin is up about 7,000%, even after settling a bit to trade Sunday around $323, according to coinmarketcap.com.

Bitcoin’s gains—it is trading at about $19,000—has investors willing to consider anything that looks like the surging virtual currency, said Jimmy Song, a bitcoin developer based in Austin, Texas. “Retail investors in Korea are driving a lot of the price,” he said. “They will buy anything that looks reasonably cheap.”

Many cryptocurrencies have been benefiting this year from a combination of greater recognition in countries such as Japan and South Korea, rising interest from institutional investors and Wall Street firms, and a boom in a new fundraising method called the initial coin offering, which has attracted more than $4 billion in new capital this year alone.

The universe of cryptocurrencies has a total market value of about $600 billion. Bitcoin, at $323 billion, comprises most of that, but there are several notable alternatives, such as Ethereum ($71 billion), Ripple ($29 billion), Bitcoin Cash ($32 billion) and litecoin ($17.6 billion). Twenty-six of these currencies have market values above $1 billion. Before 2017, only bitcoin and Ethereum were at that level.

The virtual currency bitcoin continues surging to new highs as a frenzy of investors get in on the action. WSJ's Paul Vigna explains what you need to know, and how to invest should you want to join the mania. Photo: Alexander Hotz/The Wall Street Journal.

The gains for bitcoin have created a situation where investors are jumping into any currency that looks like the next good bet, which can have an outsize effect on what are relatively small, thinly traded markets.

Litecoin, launched in 2011 and the first major alternative version of bitcoin, is especially benefiting from bitcoin’s surging popularity. For one thing, several industry insiders have noted, Coinbase’s online exchange GDAX supports trading of the currency. Since Coinbase has emerged as the first service many newcomers are trying out, they are also being exposed to litecoin for the first time.

Charlie Lee, the currency’s creator, wrote on Twitter on Wednesday, that litecoin is getting “so much mainstream exposure.” He warned that investors shouldn’t expect these gains to last. “Every crypto bull run I’ve seen has been followed by a bear cycle,” he wrote. Mr. Lee couldn’t be reached for comment.

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Bitcoin was released in 2009 by an anonymous creator known as Satoshi Nakamoto. Because the software was open-sourced, it meant anybody could copy it and produce a new version with any tweaks or changes they wanted. That malleability is the reason there are now more than 1,000 of these altcoins.

Analysts say that many of those tokens have marginal prospects or are pump-and-dump schemes. But the largest have billion-dollar valuations themselves and could prove to be viable bitcoin alternatives.

Mr. Lee is a software engineer who worked at Google and Coinbase. In October 2011, he released his version of bitcoin, which he dubbed litecoin. It tweaked some features of bitcoin, resulting in a network with faster settlement times for transactions and lower fees. He often would characterize it as the silver to bitcoin’s gold.

Litecoin has been around long enough, and has enough developers working on it, that it appears more stable than some of the newer currencies. That development team also has a reputation for testing and implementing upgrades that later show up in bitcoin, Mr. Song and others noted. Still, it has not been able to attract as many developers and businesses to it as bitcoin has, and that has limited its appeal somewhat compared with its larger peers.


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