When anyone mentions crypto, the first name that usually comes to mind is Bitcoin. However, there are hundreds more cryptocurrencies that have been around nearly as long as the first cryptocurrency but at a fraction of the price, such as Litecoin.
If Bitcoin is digital gold, then Litecoin is digital silver; it is faster and more abundant. Casual investors can invest in this virtual coin in just a few steps.
What is Litecoin?
Litecoin (LTC) is a peer-to-peer cryptocurrency and open-source software project like Bitcoin, designed for cheap and fast transactions. It was created in 2011 through a soft fork of the Bitcoin blockchain and was one of the first Bitcoin spinoffs or “altcoins.”
One of Litecoin’s lead premises was to provide faster transactions by confirming a new block on the Litecoin Network every 2.5 minutes as opposed to Bitcoin’s 10 minutes. Like Bitcoin, Litecoin can be purchased and sold through online platforms such as digital currency exchanges and alternatively, be mined with specialized computer hardware through a version similar to Bitcoin’s Proof of Work mechanism.
Litecoin’s price is generally correlated to Bitcoin’s price movements, rising when Bitcoin rallies and falling when Bitcoin declines. Due to Litecoin’s faster transaction speeds and lower fees, some merchants, vendors, and blockchain applications have introduced Litecoin payment processors.
This demand has also contributed to many major global cryptocurrency exchanges to list Litecoin, making buying cryptocurrency more accessible around the world.
Buy Litecoin in 5 Steps
1. Get a Litecoin Wallet
The first step to buying Litecoin is having somewhere to store it. There are several ways to store Litecoin depending on convenience or security needs. Though cryptocurrency exchanges and investing platforms offer custody services to hold cryptocurrency, investors typically only use exchanges and investing platforms to purchase Litecoin and then withdraw the coins to a Litecoin wallet.
The first step is to determine which type of cryptocurrency wallet better fits investing needs, of which there are two distinctly different types.
A “hot wallet” is an easy and free way to store Litecoin through a service connected to the internet. Hot wallets are popular and typically accessed through websites, browser extensions, or desktop applications.
Hot wallets are also convenient for users because they are always online and can be accessed from a different device if an old device becomes inoperable. However, it’s because hot wallets are connected to the internet that they can be more vulnerable to hacks and theft. When creating a wallet, the user is provided with three important components to be safely stored for future use:
• Public Key Address: The wallet’s public address that is shared with others in order to receive Litecoin. This will need to be readily accessible to withdraw funds to the wallet.
• Private Key: Private password consisting of an arbitrary string of letters and numbers required to access the wallet’s funds.
• Seed Recovery Phrase: A backup login method in case the private key gets lost, which consists of a list of random words in a sequential order. Some wallet providers may offer different length seed phrases but typically contain 12, 18, or 24 random words.
Coinbase, the largest U.S. cryptocurrency exchange, also provides hot wallet services. Mycelium, Exodus and Electrum are other examples of some hot wallet providers.
Another option for investors concerned about online safety is a “cold wallet,” a physical device that must be purchased and is only ever connected to a computer to send or receive cryptocurrency as needed. Otherwise, it is safely stored by the individual owner where it remains offline and disconnected from any computer or internet connection.
This security measure creates an “air gap” between potential malicious parties and any form of online or local area network (LAN) access to Litecoin in storage. While individual cryptocurrency owners tend to self-custody and store cold wallets at home, it is not unheard of for investors to take further measures and store a cold wallet in a bank-protected vault. Trezor and Ledger are examples of cold wallet makers.
2. Create Account on Cryptocurrency Exchange
The safest method for buying cryptocurrency is through a reputable digital currency exchange, an investing platform exclusively for buying and selling digital currencies.
Coinbase is the largest cryptocurrency exchange in the U.S. by volume. Binance, Gemini, Kraken, Cash App and Bisq are other well-known, popular markets. As cryptocurrencies become more popular, it’s also become possible to buy Litecoin and other cryptocurrencies through online investing platforms like SoFi Invest®.
The first step to invest in Litecoin is to create an account on a digital currency exchange or investing platform that sells Litecoin. This starts by registering a username, complex password, and storing them in a safe place offline.
Next, new users will be required to verify their identity by providing basic personal information such as date of birth, address, nationality, and providing a form of personal identification such as a valid government-issued driver’s license or passport.
Financial companies are required to comply with SEC-mandated Know Your Customer and Anti-Money Laundering (KYC/AML) cryptocurrency regulations to prevent fraud and provide an assurance of customer due diligence. This process is subject to approval and may take a couple days before being approved to continue funding the account and using it to trade.
3. Deposit Funds Into Cryptocurrency Account
Once the account is created, a funding method must be linked to the account to transfer money into the account. Bank accounts are typically used to fund accounts but some platforms may also allow other third party payment providers or wire transfers.
The user may be asked to provide the bank account number and routing number in order to link a bank account, after which a series of microtransactions may be initiated to confirm a successful connection.
After an account is successfully connected, funds may be transferred from the funding account to the investing account, which can then be used to buy Litecoin. Funds may be deposited up to a certain dollar amount and will then be available to trade. Prices of Litecoin have soared since the end of 2019, rising more than 300% to $174.48 near the beginning of February 2021.
4. Submit Buy Order
Once the account is funded, it’s time to buy Litecoin. It may be possible to pick from two options: a market order or limit order.
After a buy order executes, the required funds will be debited from the account’s balance and the purchased coins will appear in the account. The newly-purchased Litecoin is immediately available for spending, trading, or transfer.
Market orders are more common for even simple investing platforms. A market order simply buys the designated amount of Litecoin at the current market price. This can result in some price slippage especially during volatility, but guarantees that a buy order is executed immediately.
Limit orders allow for some flexibility and precision in buying only at certain prices. An investor can determine at what price they want to buy and nothing higher. If the price is never met, the trade doesn’t execute. A limit order can be set for the day or in some cases for a couple months.
5. Withdraw Litecoin
After purchasing Litecoin, the next step is to withdraw it from the investing platform and send it to a private and secure wallet. This process is completed as follows:
• Initiate a withdrawal request
• Input the desired token withdrawal amount
• Copy and paste the newly created wallet’s public address
• Submit the withdrawal request
The request should initiate immediately and place the withdrawal order into a queue on the Litecoin network. Because Litecoin’s transaction speed is multiple times as fast as Bitcoin’s, it should only be a matter of minutes before the requested withdrawal amount appears in the designated wallet’s balance.
Is Litecoin a Good Investment?
Litecoin is one of the oldest cryptocurrencies having been around since 2011. It has maintained its position as one of the most popular cryptos, consistently being a top-five cryptocurrency based on token price and market cap.
While there are many different types of cryptocurrency, some of which are not yet actively functioning or as time-tested, Litecoin’s network has been among the fastest transaction speeds in cryptocurrency for years. Litecoin is easily accessible on many global digital currency exchanges and investing platforms, providing the token with high liquidity and global market penetration.
After initially trading for a few cents in late 2011, Litecoin has seen exponential growth over time. Litecoin also has a total maximum supply of 84 million compared with Bitcoin’s maximum supply of 21 million, making Litecoin four times as abundant as Bitcoin but more scarce than many other large cryptocurrencies such as Ripple and Ethereum.
Proponents of cryptocurrencies say the market is here to stay and disrupt the traditional financial sector. Retail investors have immediate access to investing in disruptive cryptocurrency projects like Litecoin alongside accredited investors.
As the cryptocurrency asset class transitions from one market cycle to another, some investors argue that it can continue to provide outsized investment opportunities.
In addition to Bitcoin, investors have other investment options in cryptocurrency including Litecoin. With the option of buying whole or fractional coins, Litecoin is a user-friendly investment option that allows users to buy as much or as little Litecoin as desired and transfer it quickly.
With SoFi Invest, investors can buy whole or fractional amounts of Litecoin through a safe and secure investing platform.
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