It's time to start looking for an overlooked or undervalued cryptocurrency with the potential for a breakout rally in 2025. In a best-case scenario, this should be a cryptocurrency trading well below its all-time high and with a compelling investment thesis for the year ahead. It should also have a proven track record of explosive upward moves.
One cryptocurrency that meets all three of these criteria is Litecoin (LTC -1.55%). While Litecoin may be up only 42% this year, it could have a much more impressive performance in 2025. Here's why.
"Digital silver"
As its name suggests, Litecoin is a "lite" version of Bitcoin (BTC -1.30%). It launched back in 2011, using much of the same computer source code used to create Bitcoin. As a result, Litecoin shares many of the same underlying characteristics as Bitcoin. For example, it is mined just like Bitcoin, has a halving event every four years just like Bitcoin, and has a relatively small circulating coin supply, giving it nearly the same type of scarcity as Bitcoin.
Litecoin's creators envisioned it as a faster, cheaper, and more efficient version of Bitcoin. If Bitcoin is "digital gold," then Litecoin is "digital silver." While Litecoin has lost some of its luster over the past decade, it remains one of the 25 largest cryptocurrencies in the world, with a nearly $8 billion market cap.
The spot ETF investment thesis
All these characteristics of Litecoin are especially important now as we head into 2025. That's because Litecoin is typically viewed as considerably less risky than other, more speculative cryptocurrencies. Just like Bitcoin, Litecoin is considered a commodity and not a security. Theoretically, that makes it much easier for regulators to approve new products linked to Litecoin.
Image source: Getty Images.
In fact, the growing consensus now is that Litecoin will be the next cryptocurrency to get a spot exchange-traded fund (ETF). As Bloomberg highlighted earlier this month, several other top cryptocurrencies often mentioned as potential spot ETF candidates -- such as XRP and Solana -- may still carry too much regulatory risk. In contrast, Litecoin is basically free and clear of any regulatory concerns and has a much clearer path to Securities and Exchange Commission (SEC) approval.
Back in October, crypto investment firm Canary Capital filed with the SEC for a spot Litecoin ETF, and the price of Litecoin spiked by 10%. Given all the pro-crypto optimism surrounding the Trump administration, we could potentially see a spot Litecoin ETF approval by mid-2025, if not sooner. If so, that could send the price of Litecoin soaring. This is the same pattern we saw with the launch of the new spot Bitcoin ETFs.
Does Litecoin have breakout potential?
The big question, of course, is just how much breakout potential Litecoin might have. The coin currently trades around $100, more than 75% below its all-time high of $412. That's important because other top cryptocurrencies (such as Bitcoin) are either setting new all-time highs or close to hitting their all-time highs. Litecoin appears to have much more room to run.
It's interesting to take into account what happened with Litecoin during the previous crypto bull market rally back in 2020-2021. In October 2020, Litecoin was trading at around $50 and wasn't attracting a lot of attention from investors. Within a span of seven months, however, Litecoin zoomed past the $400 mark in May 2021. Litecoin had a similar run in 2017 when it also hit $400. So, we know Litecoin definitely has explosive upside potential.
Can Litecoin deliver an encore performance in 2025? To answer that question, it's useful to consider the correlation between Bitcoin and Litecoin. Over the past year, the correlation between the two is a robust 0.75. The only other major altcoin with a significantly higher correlation over that time is Ethereum, which has a 0.89 correlation with Bitcoin.
That tells me that Litecoin has a relatively high probability of tracking any upward moves made by Bitcoin over the next 12 months. If you think Bitcoin will explode in value next year, Litecoin could go along for the ride.
Before you buy Litecoin, read this
Just keep in mind that there's a reason Litecoin is trading 75% below its all-time high. There's a reason it has dropped out of the list of the top 20 cryptocurrencies by market cap. And there's a reason Litecoin has significantly underperformed Bitcoin this year. It could simply be the case that Litecoin's best days are already behind it.
That said, it's always exciting to discover an overlooked gem or to find a potentially wildly undervalued investment. If the SEC approves a spot Litecoin ETF next year, Litecoin could become the first breakout cryptocurrency of 2025.
