Founded in 2011, Litecoin is one of the oldest cryptocurrencies on the market. The “little brother” of Bitcoin has rarely been in the headlines since the crypto boom in 2017. That could soon change, as Litecoin will likely have a spot ETF approved in the United States.
Bloomberg’s ETF guru Eric Balchunas commented on the topic in X.
Litecoin ETF now has all the boxes checked. The first alt coin ETF of 2025 is about to be on the clock. I don't see any reason why this would be withdrawn either given SEC gave comments on the S-1, litecoin is seen as commodity and there's new SEC sheriff in town. https://t.co/DaE7jxlb9s
— Eric Balchunas (@EricBalchunas) January 16, 2025
A Spot ETF is an ETF backed by a real cryptocurrency. Therefore, the demand for a Spot ETF directly affects the Litecoin price, as the ETF must purchase Litecoin from the market according to the demand.
ETF applications in the United States proceed in two stages. First, an S-1 application is filed with the SEC, which oversees the securities markets and usually provides its comments within a few months. The application is then amended as necessary.
After this, a 19b-4 filing is done and is now in motion for the spot Litecoin ETF. This starts the process for SEC approval. The SEC then has three options (every couple of months): it can reject or approve the filing or postpone the decision. The fourth deadline is about 9 months from the 19b-4 filing, at which point it must either be approved or rejected.
The first spot Bitcoin ETF was approved in the United States after more than 10 years of waiting in January 2024. Ethereum also got its spot ETF in July 2024.
According to Eric Balchunas, there are no significant obstacles to a Litecoin spot ETF. This is also because the CFTC (Commodity Futures Trading Commission) declared Litecoin a commodity earlier. Many other cryptocurrencies have received designations as securities from the SEC, but Litecoin does not have this impediment.
Therefore, the Litecoin spot ETF may be approved faster than previously applied spot ETFs. The X post below shows the status of applications as of December 2024.
Here's the current list of spot crypto ETF filings: pic.twitter.com/zSxMx6AKIp
— James Seyffart (@JSeyff) December 3, 2024
The 19b-4 filings include several crypto indices and Solana ETFs. A spot XRP ETF will likely be next in line once the lawsuit against the SEC is finally settled. Although Ripple already received a significant win vs. the SEC in July 2023, parts of the Ripple vs. SEC case are still pending.
Is there an investment case for Litecoin?
Litecoin is a cryptocurrency familiar to all veterans of the 2017 crypto boom. At the time, Litecoin was one of the most popular altcoins alongside Bitcoin Cash, Ethereum, and XRP. Litecoin founder Charlie Lee was also one of the most well-known figures in the crypto scene.
Bitcoin is digital gold, and Litecoin is digital silver.
This was the view of many investors about Litecoin. It is a coin based on Bitcoin’s code, with four times the supply and one-fourth of the block time. Litecoin has also been seen as a testing environment for Bitcoin, as it has received similar technical updates.
Litecoin’s popularity peaked during the crypto boom of 2017. Litecoin had a strong reputation and was listed in the top crypto exchanges. For example, Coinbase only listed a few cryptos at the time, one of which was Litecoin.
The situation changed at the turn of 2017 and 2018. At that time, exchanges like Binance and KuCoin entered the market. These exchanges brought hundreds of other cryptocurrencies within reach of investors.
Another significant factor in Litecoin’s decline is technology. Just 10 years ago, Litecoin was one of the only options for cheap and fast transactions. Today, its 2.5-minute block time is already really slow compared to scalable smart contract platforms with sub-second block times. When you consider the confirmations required by exchanges for transfers, an LTC transaction on a crypto exchange can take even longer than Bitcoin.
Since Litecoin is a pure cryptocurrency, there is no staking, and it cannot have an ecosystem similar to that of smart contract platforms. Creating an investment case for Litecoin in the current crypto ecosystem is difficult when stablecoins are a more popular way to transact.
We don’t believe the spot ETF will bring significant new demand for Litecoin. LTC barely fits into the top 20 crypto rankings, and the project will likely slowly slip lower and eventually even out of the top 50. The same fate probably awaits Bitcoin Cash, which, like Litecoin, was very popular during the 2017 crypto boom.
However, Litecoin is not dead. It still receives technological updates, while around 200,000 transactions are made online daily. Due to its longevity, Litecoin has broad support in worldwide exchanges and has accumulated many holders over the past 14 years.