Cryptocurrency analyst Benjamin Cowen has recently raised concerns about Litecoin (LTC) as a viable long-term investment. According to Cowen, Litecoin's performance, especially when compared to Bitcoin (BTC), leaves much to be desired. He points out that since 2013, LTC has depreciated by 95% against BTC.
In terms of yearly highs, Litecoin reached $146 in 2019 but has only managed to hit $115 in 2023. Cowen argues that this is particularly concerning given the massive amounts of money printed by the Federal Reserve in recent years. He suggests that Litecoin offers "too much risk for very low reward."
Cowen also delves into Modern Portfolio Theory, using Monte Carlo simulations to show that a portfolio consisting of BTC, ETH and LTC would yield the best risk-adjusted returns (both Sharpe and Sortino ratios) with a 0.0% allocation to Litecoin. This is a strong statement against the asset's potential as a portfolio diversifier or as a long-term investment.
While Cowen's analysis is compelling, especially for those considering a long-term crypto investment strategy, it is worth noting that he focuses on the LTC/BTC pair. Some might argue that the LTC/USD pair could be a more relevant metric for retail investors, who are less concerned with LTC's performance against BTC and more interested in its fiat value.
However, even if one were to consider the LTC/USD pair, Litecoin's underperformance remains evident. The coin has struggled to break past its previous highs and has generally been in a downtrend, which does not inspire confidence.
Moreover, Cowen's point about Litecoin's occasional pumps resulting in lower highs is noteworthy. These "pump and dump" cycles can be detrimental for long-term investors, who might be caught buying at the top.