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article imageLitecoin creator Lee warns about the risks of buying litecoin

By Ken Hanly     Dec 14, 2017 in Technology
Recently the price of litecoin a smaller competitor of bitcoin, and in many ways similar, shared in the meteoric rise of its big brother. Its price more than doubled from Sunday Dec. 10 to over $300 on Tuesday morning.
Litecoin(LTC) is now the fourth largest crypto coin by market cap.
Litecoin creator Charlie Lee sounds warning for litecoin buyers
Many litecoin enthusiasts were busy celebrating the rise in their holdings. However, Charlie Lee a former director of engineering at the well-known crypto-exchange Coinbase sounded a clear warning last Monday night.
Lee wrote: "Sorry to spoil the party, but I need to reign in the excitement a bit…,Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can't handle LTC dropping to $20, don't buy!"
Joe Clayton who heads the Securities and Exchange Commission (SEC) also had words of warning: "The world's social media platforms and financial markets are abuzz about cryptocurrencies and initial coin offerings. There are tales of fortunes made and dreamed to be made. Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies. If any person today tells you otherwise, be especially wary."
Causes of litecoin's rise
Many think that bitcoin price growth is positively impacted by the start of futures trading on the Chicago Board of Exchange (CBOE) and the prospect of more futures trading by the Chicago Mercantile Exchange(CME) later this month.
The increased trading activity in bitcoin has trickled down into other cryptocurrencies such as litecoin.
The increased activity in bitcoin trading is not only driving up transaction fees but clogging the network. Litecoin has faster speeds than bitcoin transactions and lower transaction costs making it more attractive.
Coinbase, the popular cryptocurrency exchange is adding an astonishing 100,000 new users a day and as noted in a recent Digital Journal article was for a time the number one app on the Apple App Store.
Coinbase is only dealing with bitcoin and litecoin as well as the second largest coin etherium (ether).
Some buyers are beginning to realize that litecoin has advantages over bitcoin in terms of speedier transactions and lower fees as well as having many more coins available. As a result its price is not yet that high.
Even though the prices of both bitcoin and litecoin have created what many consider an unsustainable bubble, many inexperienced buyers may be entering the market so that they do not miss out on the tremendous games that many who entered the market earlier have gained.
Finally the creator of litecoin Charlie Lee has often been appearing on media so that litecoin has a stronger presence in the public mind. Lee is hardly a charismatic figure but a low key straight-sounding chap but this may actually be a plus as he does not sound like an insincere huckster. Lee has been on CNBC and Glenn Beck as shown on the appended videos.
With the huge increase in prices news media have begun to cover the news about Litecoin and this too no doubt creates more buying interest.
Can the upward trend last?
Even Charlie Lee warns that the present trend is ultimately unsustainable. Lee notes that there could be a multi-year bear market with the litecoin price dropping as low as $20.
At the very least there is likely to be a correction of considerable magnitude, no doubt thousands of dollars in the case of bitcoin.
However, others point out that new players are coming in all the time and that the market is nowhere near saturation but is constantly growing. In the case of bitcoin the number of coins is quite limited so any new demand will push the price up even further. Litecoin has more coins so the movement may not be as large.
For the present the market is likely to show more volatility with large swings rather than simply a burst of the bubble with prices continuing down and down.
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