338k users of the leading crypto had to bear extreme volatility — seeing a 30% intra-day rise then fall
Not a good day for the financial markets as I sit down to write this piece. With the exception of the safe haven of the U.S dollar, broad-based selling was seen across a wide range of assets, including the cryptos. Although the digital assets were better known for this kind of volatility — it was reflected among all assets. Apart from volatility, pump & dump schemes are pretty common in the Cryptoverse too —usually perpetrated by fake news.
And this is what happened to one of the leading cryptos, Litecoin, last week. Top cryptos like Bitcoin and Etherum have already been sliding since the recent highs created in the first week of September — both digital coins have lost over 20% since that peak, with Bitcoin trading around $43.9k and Ethereum hovering around $3,900 at the time of writing. Litecoin users faced off an additional bout of extreme volatility on September 13.
News emerged that day from a verified Twitter account (later deleted) that Litecoin had entered a partnership with Walmart — lifting the crypto by 30%. As it turned out, it was fake news, and in the aftermath of this declaration, LTC gave up all its gains — falling from $238 to around $170. By the time GlobeNewswire published a notice to “disregard” the news release, the damage was already done.
Separately, the Litecoin Foundation said in a Twitter post it had no information on where the news release had originated. Both Walmart & Litecoin Foundation are now investigating the event. Coming back to Litecoin, it is a venerable and widely used cryptocurrency, with 338k active weekly users (on a 12-week average basis), higher than Doge, USDC, and even — recently — more users than Tether (USDT) on bitcoin and Ethereum (right chart below).
The recent onslaught by novel smart contract platforms like Cardano, Solana & Polkadot has thrown Litecoin out of the Top 10 cryptos by market cap — nevertheless, it remains one of the leading cryptos. Having said that, LTC’s use is still primarily speculative, with 80% of the supply held by investors. With the combined effect of the fake news and the extreme risk aversion in markets today, Litecoin has now caved into its price floor (support) of $179 — trading around $159 at the time of writing.
According to Chainalysis Market Intel, Litecoin users are still mainly using the asset speculatively. One can ascertain that this large army of speculators may have gained tremendously by selling into the Walmart news and this also gives credence to the theory that the fake news might have been planted — classic pump & dump might have come into play here.
Chainlysis further suggests that LTC does not have as regular activity as bitcoin and Ethereum. This makes it harder to identify unusual behavior, but, as the left chart above shows, there have been reasonably large inflows of Litecoin to exchanges in August and September. However, these inflows were likely motivated by prices climbing back to their highest level since mid-May. The spike in inflows on 13 September is not necessarily suspicious, as many holders will have rushed to sell as the price climbed.
Despite the maturing of the assets and increased professionalism, roller coaster rides remain a common element in crypto prices. This is what makes them volatile and unpredictable — certainly not for the faint of heart.
Originally Published on Medium