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XTB TRADEBEAT

This cryptocurrency beats Bitcoin in terms of rate of return in 2017

Summary:

  • Bitcoin (BTCUSD on xStation5) constantly hovers below a $17k mark while futures liquidity at CBOE remains paltry
  • Bitcoin mania keeps going while some people even borrow money in order to purchase the cryptocurrency according to a securities regulator
  • Litecoin (LTCUSD) has vastly outrun Bitcoin in terms of a rate of return this year

The Bitcoin mania keeps going after a launch of future contracts at CBOE in the past weekend, however there is another reason why the ongoing rally could not turn out sustainable. Nevertheless at first let’s mention sub-par liquidity of BTC futures at CBOE underlining that the market might be susceptible to hectic moves in both sides as a relatively small amount of money could shake the price substantially.

link do file download linkBitcoin futures liquidity remains remarkably low during US trading hours. Source: Bloomberg

Obviously it was just the first session and there is a likelihood that liquidity conditions improve going forward, however taking into account an amazing fever when it comes to Bitcoin which was seen in the run-up to a futures launch this scenario could be slightly disappointing. On the other hand, one needs to highlight a tremendous gap between the futures and the spot price even as we take into consideration Bitcoin standards. Nonetheless, according to CBOE CEO Edward Tilly ’arbitrage will close the gap between the futures and spot, but it won’t be in the 12 hours of trading we’ve seen so far’, he also added that it might take ’days or even weeks’. Finally one may forecast that with more liquidity and more contracts traded there ought to be less discrepancy between the futures and the underlying price.

The fact that the Bitcoin mania keeps its momentum might be emphasized by people deciding to borrow money in order to purchase the cryptocurrency. Furthermore, according to Alabama securities commission director Joseph Borg there are mortgages being taken out to buy the virtual currency. He added that people even do credit cards and equity lines to avoid a so-called FOMO (fear of missing out). However, his fears have not been dialed back after an introduction of BTC futures at CBOE as he does not think those contracts legitimize the digital currency.

link do file download linkBitcoin (BTCUSD) trades still below a $17k mark after taking a stab at establishing its new peak. Should the closest resistance is beaten, it could give a rise to further gains where even a $20k mark could be in sight. Source: xStation5

Even as Bitcoin has drawn the most attention so far this year, it has not been the best performing cryptocurrency for all an astonishing rate of return at ca. 1640% since the beginning of 2017. Litecoin has well outstripped its peer making a year-to-date rate of return approximately at 5640% while the latest leg higher has been probably sparked by a launch of BTC futures (the price moved up from $130 before the weekend reaching a peak a touch above $250).

link do file download linkLitecoin has featured itself one of the highest correlation to Bitcoin given a 90-day rolling coefficient. Source: sifrdata.com

Looking at the table above we may spot that correlation between Bitcoin and Litecoin has been one of the highest among the most traded cryptocurrencies. Once this scheme keeps going Litecoin could become the most volatile digital currency along with the king Bitcoin. Moreover, a glance at the chart beneath which weighs Litecoin against Bitcoin unveils a striking similarity of moves over the course of the recent months.

link do file download linkLitecoin and Bitcoin have gone in tandem of late being the best correlated cryptocurrencies given a 90-day period of time. Source: xStation5

Disclaimer

This article is provided for general information purposes only. Any opinions, analyses, prices or other content is provided for educational purposes and does not constitute investment advice or a recommendation. Any research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Any information provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

Past performance is not necessarily indicative of future results, and any person acting on this information does so entirely at their own risk, we do not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.