In January 2024, when the US Securities and Exchange Commission (SEC) approved 11 initial applications for spot ETFs, a wave of optimism surged through the cryptocurrency market, particularly for Bitcoin. The approval spurred a notable increase in Bitcoin’s price, attracting significant institutional interest. Given this backdrop, it isn’t surprising that other major crypto projects, such as Litecoin (LTC) — a proof-of-work cryptocurrency — are now in the spotlight.
However, the start of 2024 has not been kind to Litecoin. As of now, it is trading at $94.89, which marks a 22% decline over the past 30 days. This downward trend mirrors the struggles faced by many altcoins during this period as they relinquish some of the gains achieved in the previous year. Analysts suggest that a key factor contributing to Litecoin’s price drop is the diminishing likelihood of spot LTC ETFs receiving SEC approval in 2025. As tracked by Polymarket, the odds for the approval of these ETFs have recently plummeted to 24% as of January 13th.
Odds of Spot ETFs for Litecoin Continue to Drop
For several months, both the crypto industry and betting markets have closely tracked the odds of spot Litecoin ETFs becoming a reality. On December 19th, Polymarket indicated a 75% chance of approval, but this optimism faded by the year’s end. As 2024 began, predictions were hovering around 50%, but they have since deteriorated to the current 24%. Despite this bearish sentiment, some analysts remain hopeful. Eric Balchunas, a Bloomberg analyst, expressed optimism through a recent post, arguing that the SEC may approve these funds due to Litecoin’s nature as a fork of Bitcoin.
A Wave of Crypto ETFs Soon?
According to Balchunas, the market is poised for the approval of new spot ETFs for various cryptocurrencies. In a Twitter post from December 18th, he suggested that a Bitcoin and Ether ETF combination might soon receive approval, and Litecoin could be next in line due to its relationship with Bitcoin. Balchunas also expressed the possibility of HBAR gaining approval as it is not classified as a security, potentially followed by XRP or Solana. However, with XRP entangled in a securities lawsuit, its prospects remain dim.
What’s Ahead for Spot Litecoin ETFs
Currently, Canary Capital is the only entity that has submitted an application for a Litecoin ETF. Analysts anticipate that Grayscale may also pursue this route, as it has a Litecoin Trust managing over $215 million in assets. Despite potential SEC approval, the future of Litecoin spot ETFs appears uncertain. Experts question whether institutional investors will show robust interest in these offerings, particularly in light of the relatively weak performance of Bitcoin and Ethereum spot ETFs. Bitcoin funds currently account for only 5.7% of the total market cap, while Ethereum represents a mere 2.96%. Given Litecoin’s position in the market, many analysts are skeptical about the potential impact of spot LTC ETFs.
Featured image from Pexels; chart from TradingView.
