At its peak price, Litecoin’s overall return on investment exceeded 10000%. Between 10th May and 20th July 2021, on the other hand, the coin shed more than 75% of its value. These two instances exemplify Litecoin’s greatest but also the riskiest feature - volatility. They show you that depending on your analysis skills and investment strategy, you can turn a little LTC investment into a fortune or simply lose it all.
But how do you leverage volatility to make money with Litecoin, and how do you avoid losing your trading capital and profits earned when investing in the altcoin?
We look at some of the ways that you can make money with Litecoin in this post. We also tell you of the most common ways through which past and current Litecoin investors have lost money and provide tips on how you can protect your investment.
Ways To Make Money With Litecoin (LTC)
While Litecoin was intended to offer a faster and inexpensive alternative to Bitcoin as a medium of exchange and store of value, it has been picked up primarily as a speculative investment product. Here are the four most common ways through which you too can make money with Litecoin.
When investing in Litecoin, you are essentially buying LTC coins today with the intention of holding on to them for a long period of time. You are hopeful that during this time, Litecoin value will skyrocket and make you money as the value of your investment appreciates in proportion to LTC’s value rise.
Despite the many challenges that Litecoin has gone through in the past, it has proven its resilience by maintaining a positive overall ROI. Further, Charlie Lee is back to heading the Litecoin organization, and global acceptance of cryptocurrency is on the rise, which convinces most crypto experts that Litecoin prices will most likely continue rising and making current investor money.
Investing, unlike most of the other investment strategies, is beginner-friendly as it simply involves buying and holding. We, therefore, recommend it to novice crypto enthusiasts and intermediates who don’t have enough time at hand to keep a close tab on the crypto market.
Trading Litecoin involves leveraging its price volatility to make money. The most basic form of Litecoin trading involves ‘timing’ the market and buying LTC tokens when the price is low and selling them when it rises. Unlike investing, where you are holding onto the digital asset for months, often years, traders will sell the coins after a few seconds, minutes, hours, or days.
You could also be right if you said trading Litecoin involves riding a trend. This implies buying at a low price (when going long) or selling at a high price (when shorting), riding the down/up-trending price rally and selling (for Long trades), or buying back (for short trades) at the peak or the rally and immediately before it reverses.
Mining involves verifying and confirming transactions on the Litecoin blockchain network and being rewarded with free LTC tokens in return. At the moment, the reward for every block mined on the Litecoin network is 12.5 LTC coins.
There are two ways to go about Litecoin mining. First, you could choose to invest in powerful mining and go solo, or you could join a mining pool by contributing your mining rigs computational power and sharing the mined LTC reward among the pool members based on the amount of power continued.
Litecoin network is powered by the Proof of Work (POW) consensus algorithm, but this hasn’t stopped third parties from coming up with platforms when you could stake your LTC tokens and earn interest. To start staking, you first need to invest in Litecoin, then join a staking platform (these are often DeFi apps and protocols offered by the Ethereum blockchain, Binance smart chain, or via third-party apps hosted on digital wallets), lock these coins in the program, and earn interest.
In most instances, these programs lend out your Litecoins to other traders and investors at an interest. They then share the incomes from the LTC loan with you in the form of interest for your locked funds. In the traditional finance setting, staking is comparable to locking cash in a fixed deposit/savings account with a bank that pays you a guaranteed interest after a pre-agreed period.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Ways To Lose Money With Litecoin (LTC)
Not everyone who buys Litecoin makes money. There are numerous stories online of people who lost their life savings while investing in Litecoin. We look at the four most common ways to lose money with Litecoin and share tips on how to avoid them.
Trading is as profitable as it is risky. Hereinabove, we have stated that you earn money with Litecoin when you buy low and sell high. But what happens when you buy at what you consider to be a “low” price with the expectation of a rebound and uptrend, but the LTC prices continue falling? Well, you lose money.
In such a case, you will lose 10% of your investment, if LTC prices fall by 10%. But this loss will be significantly higher if you were margin trading. You can even have your trading account read negative balance if you were managing risks poorly.
How to prevent this: For starters, don’t start trading this highly volatile asset until you have perfected the art of trading. Secondly, use as many of the risk management tools provided by the exchange/brokerage as possible. Lastly, invest only what you can afford to lose.
Hacking is slowly turning into a menace in the crypto industry as these incidences become more frequent and the amount lost with each hack becoming more sizeable. In the US, for instance, Coinbase clients are currently crying foul after hackers gained illegal access to their digital wallets and drained them of the assets stored therein. Last month, Liquid Exchange in Japan had lost more than $90 million worth of crypto to hackers.
How to prevent this: Well, there is little you can do if the hacks emanate from loopholes within the exchange or the wallet. However, Verizon states that more than 80% of hacks are associated with weak passwords, and you can solve this by using unique and strong passwords and activating multi-factor authentication. We also recommend that you invest in a reputable hardware wallet.
The Federal Trade Commission (FTC) lists crypto scams as one of the most common ways to lose your digital assets today. In most cases, you are lured to investing in attractive crypto programs that promise a higher-than-average return on investment.
You could also be lured into surrendering your log-in details for crypto exchanges or wallets via fake websites. Between October 2020 and May 2021, for instance, the FTC reports that more than $80 million worth of crypto was lost to scammers, with the average investor losing $1900.
How to prevent this: You start by avoiding the get-rich-quick programs you find online, no matter how attractive they may seem. Secondly, whitelist the website URLs for all your favourite exchanges and wallets. Importantly, keep up with crypto industry news and events to learn of emerging scams and how to avoid them.
Lost password and recovery seeds
You will also lose your Litecoin investments if you forget the password and recovery seed for the wallet where your coins are stored. In most cases, only you have the wallet’s recovery seed, and not even the service provider can help you if the seed is misplaced.
How to prevent this: You could start by using memorable but highly unique passwords for the wallet. Additionally, keep a few backups for the recovery seed in an ultra-secure but memorable place.
Bottom Line: How To Make Or Lose Money With Litecoin
Litecoin is one of the most popular cryptocurrencies today, and there are multiple ways through which you can make money with the digital asset. The most common include investing, trading, mining, and staking digital assets.
Like most other cryptocurrencies, there are also several ways through which you can lose money with Litecoin. The most prevalent is the loss to volatile price movements when trading, hackers, crypto scammers, and even loss of digital assets to a wallet whose password and recovery seed you can’t remember.
For each threat to your Litecoin crypto assets, however, we have listed some of the safeguards that you can take to prevent possible loss of funds. Practice these measures, do your own research, and keep abreast with crypto news if you wish to maintain the integrity of your Litecoin investments.