Internet currency Litecoin has brought some excitement to the world of bedroom traders recently with its price up around 4,000% since this time last year, after it was reportedly created by a former Google employee named Charlie Lee.
Today a Litecoin will cost you US$173 each, whereas you could have bought one for just US$5 this time last year as its value surges on the back of FOMO and excitement around its get-stinking-rich-quick potential.
Litecoin does not have any underlying value as such, other than if it could eventually be used in exchange for goods and services assuming there’s sufficient trust in its enforceability within the global financial system.
That credibility is largely reliant on the blockchain transaction processing system which acts as a distributed ledger able to record transactions almost instantly, while reportedly being as incorruptible as any system can possibly be.
As such Litecoin and its peers like Bitcoin, Ripple and Ethereum could have some underlying value if they could be exchanged for goods and services.
Litecoin enthusiasts are also reportedly excited by the fact it could be added to the Winklevoss brothers’ Gemini exchange for cryptocurrencies. Apparently being added to the exchange could see the Litecoin price go nuts as it would bring it to a wider market of less-sophisticated bedroom-based traders.
Given the power of the internet in blowing up unprecedented financial bubbles I wouldn’t be surprised if the Litecoin price does go gangbusters in 2018.
But you can count me out as a buyer of Litecoin or other digital currencies.
They’re not for serious investors and why you would you buy them when you can make 20%+ annualised returns by buying income-producing shares in the best companies on good valuations.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.