When the Securities and Exchange Commission (SEC) of the United States gave the green light to 11 initial applications for spot ETFs in January 2024, it indicated a positive outlook for Bitcoin. The price of the leading digital asset surged due to increased institutional interest. Consequently, other major cryptocurrency projects have followed suit, with Litecoin (LTC), a proof-of-work coin, now in focus.
However, Litecoin has encountered a challenging start to the year. Currently, it is trading at $94.89, marking a decline of 22% over the past 30 days. The recent price trend of Litecoin mirrors that of other altcoins, which have surrendered some of their gains from the previous year.
Analysts in the cryptocurrency space attribute the decline in Litecoin’s value to the decreasing likelihood of spot LTC ETF approval in 2025. Data from Polymarket indicates that as of January 13th, the probability of spot LTC ETF approval this year has dropped to 24%.
Declining Odds for Spot ETFs on Litecoin
Speculation has been rife in the crypto industry and betting markets for months regarding the possible approval of spot Litecoin ETFs. The odds stood at 75% on December 19th before gradually decreasing towards the end of the year. Starting the new year at around 50%, the odds have since dwindled to 24%.
Despite the diminishing odds, some analysts remain positive about the approval of these ETFs. Eric Balchunas, an analyst at Bloomberg, expressed optimism, suggesting that the SEC is likely to greenlight these funds, considering their association with Bitcoin.
Potential Wave of Crypto ETFs on the Horizon
Balchunas from Bloomberg believes that the market is poised for the approval of new spot ETFs covering various cryptocurrencies. In a tweet on December 18th, he hinted at the possible approval of a Bitcoin and Ether ETF duo, with Litecoin’s ETFs potentially following suit. Balchunas argued that due to Litecoin’s connection to Bitcoin, obtaining approval should be easier.
Aside from Litecoin, Balchunas also mentioned HBAR as a contender for approval, followed by XRP/Solana. However, the likelihood of XRP approval is low due to an ongoing legal battle related to its securities classification.
Outlook for Spot Litecoin ETFs
Canary Capital is the sole entity that applied for Litecoin’s ETF, with expectations that Grayscale may pursue a similar route by converting its Litecoin Trust, holding assets exceeding $215 million.
Despite potential SEC approval, experts remain cautious about the future of spot ETFs on Litecoin. There are doubts surrounding institutional investor interest in these investments, as seen in the relatively modest performances of Bitcoin and Ether spot ETFs. With Bitcoin funds amounting to $107 billion, representing a mere 5.7% of the total market cap, and Ethereum funds at $11.6 billion, just 2.96% of the total market cap, the prospects for Litecoin ETFs appear uncertain given its smaller scale in the crypto market.
Featured image from Pexels, chart from TradingView
