The introduction of Wrapped Litecoin (WLTC) onto the decentralized exchange Uniswap is making waves in the digital asset space. After its launch on November 13, WLTC has already entered the Decentralized Finance (DeFi) space, establishing its first Uniswap pair just two weeks after its creation. This follows a unique path compared to its counterparts, Ethereum (ETH) and Bitcoin (BTC), which have frequently been used as wrapped assets. The tokenized version of Litecoin (LTC) opens up new possibilities for Aave vaults, potentially leveraging the value of idle coins.
Despite the fact that only a small fraction of LTC is held by whales, with the majority in the hands of investors or retail buyers, the coin has a culture of long-term holding and accumulation, with an average holding time of 2.6 years. Interestingly, up to 20% of the supply has been held for over five years.
The launch of the WLTC trading coincided with another LTC rally on centralized exchanges, pushing the price above $101. However, LTC can be difficult for new retail traders to access due to its liquidity. The new WLTC market could attract DEX traders who will not need to host the specific Litecoin wallet.
The wrapping mechanism allows traders to store LTC through MetaMask and participate in the highly liquid DeFi ecosystem. However, there is no guarantee that using WLTC will be cheaper or smoother, as sending LTC may still incur lower fees compared to Ethereum ERC-20 tokens.
Despite its promising beginning, WLTC is still a niche asset that faces challenges. Due to its very illiquid pool, the tokenized version is still not reliably priced. Traders might be tempted to put their idle LTC to work with WLTC, but an illiquid pair and the wrapping smart contract could mean holders may not be able to immediately access the LTC.
The WLTC token is taking its first steps, with only five addresses bridging their LTC onto Ethereum so far. The biggest deposit is merely 29 LTC. The Wrapped Litecoin idea is backed by the Coinut exchange, which is working to popularize the asset, yet the exchange’s team has not done much to boost the supply of WLTC or provide additional liquidity.
Compared to the wide adoption of LTC on exchanges and brokerages, WLTC is still extremely illiquid and risky, with no partnerships with DeFi or lending pools. However, if WLTC takes off, it could reach a wider audience of DEX swappers looking for promising assets.
The current token has the unique advantage of being one of a kind, with no copycats or alternative versions. This offers potential opportunities for arbitrage that could also boost WLTC. However, it is crucial to remember that WLTC is still trying to verify its logo on Etherscan and warns that it only has one valid contract address (CA): 0x408133907cd3A75db2B031973b9ea1C084500a15.
As it stands, it is up to Litecoin holders to help build up the trading pair. The WLTC price is quoted in WETH, instead of USDT, leading to a different mechanism of price discovery. The liquidity pool currently has just over 1 ETH in liquidity, making selling WLTC at a premium virtually impossible.
In summary, while LTC has not yet revisited its all-time high above $420, it is expected to move to a new price range in the coming bull cycle. Whether WLTC will follow suit and establish its place in the DeFi space remains to be seen. As with all digital assets, potential investors should do their due diligence before diving in.
