Litecoin

On March 7, 2024, Coinbase<a href="https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizationProducts?Organization=COIN&amp;Type=Future&amp;Status=&amp;Date_From=2024-03-01&amp;Date_To=2024-03-21&amp;Category=&amp;Subcategory=&amp;Show_All=0" rel="noopener noreferrer nofollow"> filed an application</a> with the Commodity Futures Trading Commission (‘CTFC’) to list a new investment product which it called ‘Litecoin Futures contract’. Two weeks later the application’s status ticked over to ‘Certified’. <a href="https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizationProducts?Organization=COIN&amp;Type=Future&amp;Status=&amp;Date_From=2024-03-01&amp;Date_To=2024-03-21&amp;Category=&amp;Subcategory=&amp;Show_All=0" rel="noopener noreferrer nofollow">While the filing on the CTFC’s website</a> has been circulated far and wide, curiosity got the best of us and we went hunting for any insights still buried in the application. We’ve since got our hands on the unredacted 15-page submission to the CFTC and thought we’d share what we found most noteworthy, insightful and compelling.
The submission is a ‘self-certification under CFTC Regulation 40.2(a)’. According to the CFTC’s <a href="https://www.cftc.gov/IndustryOversight/ContractsProducts/ListingProcedures/index.htm#:~:text=Self%2DCertification%20Filing%20Procedures,self%2Dcertification%20with%20the%20CFTC." rel="noopener noreferrer nofollow">‘Listing Procedures’</a>, this “permits designated contract markets (DCMs) to list products for trading without prior CFTC approval by filing a written self-certification with the CFTC”. (Source: <a href="https://www.cftc.gov/IndustryOversight/ContractsProducts/ListingProcedures/index.htm#:~:text=Self%2DCertification%20Filing%20Procedures,self%2Dcertification%20with%20the%20CFTC" rel="noopener noreferrer nofollow">CFTC’s Listing Procedures</a>). Importantly as we’ll discuss below, Coinbase made an accompanying declaration that - at time of submission, March 7, 2024 - they were “not aware of any substantive opposing views to the Contract”.
Please note this is not financial advice. Interpretations herein are those of the article’s author - Robbie Coleman - and do not reflect Litecoin Foundations’ opinions. Quotations and citations are verbatim and copied in full for transparency and clarity. 
Highlights of Coinbase’s submission:
- Litecoin Futures could commence trading as early as April 1, 2024
- Each ‘LC’ (Litecoin Contract) will represent 5 Litecoin
- Coinbase has set its position limit to 10,000 LC futures; equivalent to 50,000 LTC
- As at March 31, 2024 Coinbase’s spot price was ~US$102, giving the 50,000 LTC a notional value of US$1.02b
- Coinbase contends that Litecoin’s price volatility is comparable to that of oil futures and gold.
With a launch date as early as April 1, 2024 possible, let’s waste no time diving into the 15-page submission.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/ac8a1740902841edb3d9c974fbc057d4.png">(<a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s covering letter to Mr Kirkpatrick, Secretary of the Commission (CFTC)
Litecoin: “...more practical for daily use”In no uncertain terms, Coinbase sees Litecoin as a complement to Bitcoin. Giving particular weight to Litecoin’s suitability for practical daily use. “... Litecoin's larger supply cap and quicker transaction speeds aim to make it more practical for daily use, potentially increasing its adoption and utility in the broader cryptocurrency market.” (Source: Litecoin Market Overview; <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s CFTC submission)
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/5d6acbee9f174dfc88906397d3683a9c.png">(Part of <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s description of Litecoin in its CFTC submission for 40.2(a) Certification)
The explanation fairly depicts Litecoin as the oldest surviving fork of Bitcoin (altcoin), while being prudent to point out subtle adaptations. Charlie Lee wrote of this deliberate if-it-ain’t-broke approach to forking Bitcoin 12 years ago.
“One of the goals of Litecoin is to not change what's working (from Bitcoin) unless there was a good reason to.” <a href="https://bitcointalk.org/index.php?topic=47417.msg564460#msg564460:~:text=One%20of%20the%20goals%20of%20Litecoin%20is%20to%20not%20change%20what%27s%20working%20%28from%20Bitcoin%29%20unless%20there%20was%20a%20good%20reason%20to." rel="noopener noreferrer nofollow">- Charlie Lee, aka coblee, on October 9, 2011.</a>
In addition to acknowledging how faster transactions and greater throughput make $LTC more suitable for daily use, Coinbase points out how Litecoin’s utilization of the Scrypt algorithm also makes it more accessible for the general population to mine.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/5d6acbee9f174dfc88906397d3683a9c.png">(Part of <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s description of Litecoin in its CFTC submission for 40.2(a) Certification)
“Like Bitcoin, Litecoin uses a proof-of-work consensus mechanism. Specifically, Litecoin utilizes the Scrypt algorithm, which is different from Bitcoin's SHA-256. This difference makes Litecoin relatively more accessible to individuals with consumer-grade hardware.” (Source: Litecoin Market Overview; <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s CFTC submission)
A Regulated Appraisal of Litecoin After years of being hammered by unrelenting adjective-laden maximalist rhetoric from Twitter pundits, Coinbase’s balanced portrayal of Litecoin is refreshing.
In particular, it presents LTC's currency-like attributes, use cases and potential for greater mass adoption in a largely factual way. The one expectation being when the exchange uses precious metals as an analogy to help frame Litecoin’s likeness to Bitcoin in - presumably - a more digestible way for the submission’s audience.
“Litecoin has a total capped supply of 84 million tokens, mirroring the precious metal market by creating a form of "digital silver" as a contrast to Bitcoin's "digital gold." (Source: <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>)
Fittingly, this analogy was first made on the day of Litecoin’s launch announcement by Charlie Lee. 12 years later and it’s still an apt depiction of the complementary, non-competitive Bitcoin-Litecoin relationship. “We wanted to make a coin that is silver to Bitcoin's gold”, explains /coblee when announcing the launch of a ‘lite version of Bitcoin’.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/b1b9809d38ea4ef19bd9f3f87862517b.png"><a href="https://bitcointalk.org/index.php?topic=47417.msg564414#msg564414:~:text=We%20wanted%20to%20make%20a%20coin%20that%20is%20silver%20to%20Bitcoin%27s%20gold." rel="noopener noreferrer nofollow">Charlie Lee, aka coblee, announcing Litecoin’s launch on bitcointalk.org.</a>
Coinbase’s submission for Litecoin Futures also reads as well intentioned. This comes from someone skeptical of traditional finance’s newfound affection for Bitcoin. A currency created in protest of the institutions that are now aiding its proliferation. And while filed under the name of Chief Regulatory Officer, Jane Downey, presumably the document is reflective of Coinbase’s views general of Litecoin. And if so, deserves credit for its just portrayal of Bitcoin and Litecoin.
The potential adoption for Litecoin through these Futures Contracts is monumental.<a href="https://www.coinbase.com/blog/coinbase-financial-markets-inc-secures-fcm-approval-to-bring-regulated" rel="noopener noreferrer nofollow">According to a Coinbase post</a>, approx. 75% of crypto’s trading volume is done on global crypto derivatives markets. Litecoin could be exposed to new, unprecedented trading volumes via Coinbase Derivatives as soon as April 1, 2024.
Skeptic or not, Litecoin Futures on Coinbase is big news. While Twitter / X’s reactions have been predominantly rocket emoji and moon GIF based, it’s hard not to be excited.
Litecoin as volatile as gold!?
Without a hint of irony, the ‘Volatility’ section is by far the most interesting - and reassuring - read. In it, Coinbase makes the case for Litecoin’s price volatility being comparable to that of oil futures and gold! Two commodities that would surely be perceived by Wall St as trustworthy, legitimate and ‘solid’ assets. (Disclosure: this writer feels as if ‘solid’ is a word Wall St would use to describe investments. A belief which, unlike those of his investment banker counterparts, is free of substance).&nbsp;
What makes these comparisons to ‘oil futures’ and gold even more bold is the period over which they’re made. Coinbase has not tried to validate its position by cherry-picking 24-hours of data. Rather, in the case of oil futures, the analysis is of the most recent&nbsp; consecutive three year period. Roughly a quarter of Litecoin’s life. “Since the start of 2022, the 30-day trailing standard deviation of daily price changes has averaged 3.6%. Spikes in volatility occur periodically, similar to our other product classes, such as oil futures.”&nbsp; The section goes on to compare the ‘current’ 30-day volatility of Litecoin to that of gold. “Litecoin’s current 30D volatility is below 2%. Under comparable timeframes, other commodities have experienced realized volatility levels that are in line with Litecoin realized volatility. For reference current Gold and Bitcoin 30D volatility are also just under 2%”.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/1c91cdfdda1b4c9d8970ffa64168680a.png"><a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>’s section on Volatility is GOLD!
While volatility may be exciting for pure speculators (read: gamblers), Coinbase’s comparisons highlight an often overlooked and underappreciated side to Litecoin: its maturation and evolution into a legitimate alternative currency.
In the last cycle, Litecoin’s price action was criticized. Regularly compared to food-orientated meme-coins created with the express intent to be manipulated. Litecoin should take pride in being ‘less volatile’ in an asset class undeniably plagued by opportunists, and whose reputation is recovering from scams covered in the mainstream. As the oldest surviving altcoin, what’s wrong with being a little ‘boring’? The currency has real-world utility and fulfils a global need. It has a purpose.
Statistically speaking, few blockchains are comparable. Litecoin has processed ~240m transactions without issue. Transaction fees rarely exceed $US.0001; settled worldwide within minutes. It’s arguably the most secure blockchain. Having never experienced downtime (ever) in 12 years and counting. In February 2024, $LTC accounted for more payment transactions than $BTC, $ETH and $DOGE combined. Solidifying its position as the most utilized crypto for payments on the world’s biggest crypto processor, Bitpay.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/13d9c706b5394cdb8d4ea2d0d3327ba5.png">Source: <a href="https://bitpay.com/stats/" rel="noopener noreferrer nofollow">BitPay Stats</a>.
It’s ok. Litecoin’s adolescence is over, it’s matured. For cryptocurrency to be taken seriously as an asset class, it could benefit from a little maturity. Litecoin wasn’t designed for speculation; it was designed to be used, not to be volatile. And perhaps this is one of the drivers for Coinbase’s decision to add Litecoin Futures ahead of so many others.
Accountability and Responsibility.A lot of Coinbase’s submission is clearly crafted to put minds at ease - and fair enough. Not least of which is their explanation of how it will avoid market manipulation.
“Given that the Litecoin token is traded on multiple exchanges both in the United States and abroad, and the manner in which the index is calculated, it would be difficult, if not impossible, to manipulate the price of the underlying market in a way that would affect the futures Contract”. (Souce: Coinbase)
Coinbase has also provisioned for ‘price fluctuation’ and outlines the steps it will take in the instance that Litecoin Contracts’ price is outside of the proposed “10% up and down limit” (Souce: Coinbase) to the ‘Reference Price’.
“The market will enter a halt state for two (2) minutes if a price fluctuation limit is reached. Orders can be submitted, canceled, and amended during this state but no matching will occur.” - (Souce: Coinbase | Chapter 11, ‘RULE 1111. Litecoin Futures’ (f) (3)).<img src="https://academy-public.coinmarketcap.com/optimized-uploads/37676833694349c78cf08110025c9467.png">Source: <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a> Coinbase (referred to below as ‘The Exchange’) was also prudent in the position it decided to take in Litecoin. Detailing why it would take only 50,000 of ~74 million LTC in circulation. Definitely read “IV. Analysis of Deliverable Supply” for yourself, but my takeaway is that Coinbase’s position is conservative, responsible and deliberate attempt to avoid further centralization. This writer is all for it!<img src="https://academy-public.coinmarketcap.com/optimized-uploads/2e6e9ccd5325459bb0bd7fde212e4b91.png"> Source: <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>
“The Exchange will set the position limit to 10,000 LC futures, which is equivalent to 50,000 LTC. With a $85 price of LTC, this is equal to $4.3M notional, which would be 0.07% of the LTC market cap, currently at $6.2B”. (Souce: Coinbase). Again, reading “IV. Analysis of Deliverable Supply” in detail is encouraged as this is just one perspective and interpretation.
Long on Litecoin Futures for how long?
It also appears that the Litecoin Contract - or idea of listing Litecoin Futures - has been on Coinbase’s agenda since at least December 22, 2023. See Appendix D. The outline of proposed fee schedules respective to Bitcoin, Ethereum, Litecoin and Crude Oil Futures, with an updated commencement date of April 1, 2024.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/c26fa6793e60488d99d85c781ae370ce.png"> Source: <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>
Who knows when the plan began. Coinbase <a href="https://www.coinbase.com/blog/coinbase-financial-markets-inc-secures-fcm-approval-to-bring-regulated" rel="noopener noreferrer nofollow">published a statement on August 16, 2023</a>, but it made no mention of Litecoin, let alone Litecoin Futures. The statement simply confirmed Coinbase had “secured regulatory approval from the National Futures Association (NFA), a CFTC-designated self-regulatory organization, to operate a Futures Commission Merchant (FCM) and offer eligible US customers access to crypto futures”.
Regardless, Litecoin Futures have clearly been in the works for a while. And Coinbase did not come to their decision alone. It’s stated that, prior to its Submission, Coinbase consulted with FCMs - Futures Commision Merchants, saving you the Google - about the Litecoin Contract. Again, a refreshing change from the decision-making trees pegged to Twitter/X maximalist echo-Communities. See what I did there? Swapped ‘chamber’ for… Communities. Back to Coinbase’s submission:
“The Exchange has spoken with FCMs and market participants who support the decision to launch an Litecoin Contract. The Exchange is not aware of any substantive opposing views to the Contract.“ &nbsp;
Source: <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">Coinbase</a>. In spite of his skepticism toward traditional finance creeping into this decentralized space, The Author does not have any substantive opposing view to Coinbase’s Litecoin Contract. If anything, it gets a rocket emoji AND a moon GIF!
Nearly forgot the most important part! The trading hours: “5:00 - 4:00 PM CT Sunday - Friday, with a trading halt from 4:00 PM - 5:00 PM CT Monday -Thursday.”
Please <a href="https://assets.ctfassets.net/k3n74unfin40/3xEbgdn4kcSEfs409Yrwuo/76eaa812a06b1d6d3d01fc9f7f6e996c/2024-7_Listing_of_LC_Futures.docx.pdf" rel="noopener noreferrer nofollow">read the full 15-page document for yourself</a> and let us know what you think! Or feel free to send your hate mail straight to Robbie, at <a href="https://twitter.com/robertfcoleman" rel="noopener noreferrer nofollow">@robertfcoleman</a>.

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