Can Canary’s Litecoin ETF Filing Trigger a LTC Price Boom? Beware, Bulls

Litecoin (LTC) emerged as one of the top crypto market performers as of Oct. 16, buoyed by the announcement of a new exchange-traded fund (ETF) filing.

The so-called “silver cryptocurrency” jumped by more than 9.5% in the last 24 hours to reach over $73 for the first time since July 2024.

Traders flocked to the Litecoin market after Canary Capital Group, a newly established crypto investment firm led by former Valkyrie Funds co-founder Steven McClurg, submitted paperwork to launch the Canary Litecoin ETF in the United States.

The news injected what appears to be a temporary enthusiasm into the Litecoin market, with some analysts calling it a “sleeping giant.”

$LTC Buy the Dip Coming Soon?

Litecoin is trading in its expected range, and a key ‘buy the dip’ zone between $57.85 and $61.15 could happen soon.

This might be a solid long-term entry

Is #Litecoin on your radar? pic.twitter.com/SbjZQWPW0S

— InvestingHaven (@InvestingHaven) October 15, 2024

However, historical precedent suggests that an ETF filing alone may not lead to explosive price growth in the LTC market. Here’s why.

Canara is Not BlackRock. Litecon is Not Bitcoin.

A key point to consider is Canary Capital’s limited market presence compared to larger institutions that have backed Bitcoin ETFs. Firms like BlackRock, Fidelity, and Ark Invest were instrumental in driving institutional interest in the top cryptocurrency. Their backing lent credibility and attracted capital inflows from large financial institutions, hedge funds, and pension funds.

By contrast, Canary Capital is relatively new and small. Its impact on institutional interest in Litecoin, which already suffers from a low adoption rate compared to Bitcoin, is likely limited.

The filing for an LTC ETF is the firm’s second move into the ETF space, following a similar filing for an XRP fund. However, its filings may not stir the same institutional excitement that Bitcoin ETFs did, primarily due to its lack of history of managing large capital.

Moreover, Litecoin lacks the same strong market narrative that drove demand for Bitcoin ETFs as a store of value. As a result, the chances that institutional investors will jump on the Litecoin ETF bandwagon remain slim.

Lessons For Litecoin Bulls from Ethereum ETFs

Even successful ETF launches do not necessarily translate to stronger rallies for the underlying assets. At least the performance of Ethereum’s native asset, Ether (ETH), shows the same.

The second-largest cryptocurrency saw strong pre-ETF hype, with prices rallying by around 30% in the days leading toward the launch of the first Ethereum ETFs in 2024. However, due to strong outflows from the funds, the price has retraced by over 25% since the ETF launched.

This indicates that the initial excitement may have been overhyped, and the actual institutional demand post-launch was lower than expected.

If Ethereum, the second-largest cryptocurrency with a strong ecosystem of decentralized applications and smart contracts, couldn’t sustain its rally post-ETF, Litecoin—an asset with less institutional interest and a narrower use case—may face similar, if not greater, challenges.

Historically, Litecoin has struggled to attract long-term institutional attention, and there’s little evidence that a small firm’s ETF filing will change that.

The Grayscale Omen: Another Headwind

Another important factor is the existing Grayscale Litecoin Trust (LTCN), which operates similarly to an ETF but with some key differences in liquidity and structure.

Grayscale also ran an Ethereum Trust, which it later converted to an ETF under the ticker ‘ETHE.’

ETHE, as highlighted in grey in the chart below, has contributed the most to the outflows from Ethereum ETFs following their launch. The core reason is its high fees, which have prompted investors to either rotate their capital out of the ETF or close their positions altogether.

If Grayscale decides to convert its Litecoin Trust into a full-fledged ETF, it could increase selling pressure on LTC, similar to what was observed with Ethereum.

Litecoin Has Crashed 98% Versus Bitcoin

From a technical perspective, Litecoin’s price action relative to Bitcoin (LTC/BTC) remains highly bearish.

The attached chart highlights a long-term downtrend in the LTC/BTC pair, where prices have declined since November 2013—down 98% already and trading at record lows.

The ETF news may trigger temporary spikes in LTC’s price. Still, a sustainable breakout seems unlikely in the face of a multi-year bearish technical structure, underscoring that Litecoin’s appeal is dwindling relative to stronger cryptocurrencies.

It may eventually translate into lower institutional interest.