Bitcoin holders turn to Litecoin to avoid high transfer fees

On-chain data shows a growth in Litecoin activity, suggesting that Bitcoin investors may be using LTC to take advantage of cheap transfers.

Litecoin addresses with 1000 or less LTC have accumulated

Recently, transaction fees on the Bitcoin network have shot up as a result of the high activity that the blockchain has been experiencing. This activity has come mainly due to the emergence of BRC-20 tokens, fungible tokens created on-chain using the Ordinals protocol.

A large number of meme coins have appeared that use this technology (including Pepe Coin (PEPE), which has gained extremely fast traction), so the chain has observed a high number of transfers.

In times of network congestion like these, investors have no choice but to pay high amounts in transaction fees if they want any chance of getting their transfers processed quickly.

Normally, investors find it okay to pay the slightly higher fees every time the wait times in the mempool get longer, but this time the congestion has been at historic levels, so the competition to get transactions confirmed is extremely high, resulting in an explosion in the fees.

Because of this, it does not seem unexpected that some of the holders who want to make fast transactions will at least temporarily migrate to other blockchains. According to data from the analysis company at the chain SentimentLitecoin seems to be one of the beneficiaries of this recent congestion on the Bitcoin network, which is not surprising since the network is known for its negligible fees and fast transactions.

One of the most important proofs of this can be found in the blockchain’s daily transaction numbers. So here is a chart showing the recent trend of this LTC indicator:

Looks like the value of the metric has been quite high in recent days | Source: Santiment

As shown in the graph above, the total number of Litecoin transactions taking place on the blockchain has seen a significant increase recently. The timing of this increase would coincide with the congestion on the Bitcoin network, so it seems a reasonable assumption that the two have some correlation.

Another change that has occurred on the LTC network is visible through the supply held by the investors in the 0-1,000 coin group (that is, holders who have a wallet balance in the 0-1,000 LTC range), as the chart below highlights.

The value of the metric seems to have been going up recently | Source: Santiment

From the graph, it is visible that these small Litecoin holders have observed their supply increase rapidly in the last week or so. This suggests that these retail investors have been accumulating recently.

The chart also includes data for the supplies held by the 10,000-100,000 coin and 100,000-1,000,000 coin groups. These cohorts correspond to the sharks and whales, and it seems that these huge investors have hardly seen any significant fluctuations in supply during this period.

This could mean that only the small investors migrate from Bitcoin to Litecoin, as the benefits of a lower transaction fee would be much greater for holders making small payments, while entities like the sharks and whales would anyway have such large volumes that even the high fees would a small impression on them.

LTC price

At the time of writing, Litecoin is trading around $80, down 6% in the last week.

LTC has gone down in the last few days | Source: LTCUSD on TradingView

Featured image from Michael Förtsch at Unsplash.com, Charts from TradingView.com, Santiment.net