But are there other ways to calculate Litecoin price predictions beyond market capitalization?
Litecoin Price Prediction: Monte Carlo Analysis
John Young conducted analysis of cryptocurrencies using Monte Carlo analysis.
He used a multi-step process that involved gathering historical prices of Litecoins, calculating daily returns, naming the daily range, summarizing statistics, simulating a single year and multi-year timelines, evaluating multi-year statistics and analyzing the results.
The model he used was geometric Brownian motion and the Litecoin price prediction for the year up to Nov 2018 was a price range from $6 to $507 with a mean of $122.
Statistical whiz kids would argue that this is perfectly acceptable if you believe the underlying process is stationary and well behaved. Even then, the real world tends to produce fat tails that have a habit of causing models to blow up!
So Brownian motion may be common for modeling the progression of asset prices as a stochastic process with drift and a random Brownian term with changes most typically assumed to be either normally or lognormally distributed.
But when it comes to cryptocurrencies with a short history that have prices characterized by flat-to-downward drifting price phases and exponential explosive growth spurts, it may not be the best choice.
The vast price range Young arrives at is attributable to the fact that the model is calibrated to historical data. And it could be argued that a Litecoin price prediction range from $6 to $507 is not especially helpful in narrowing down a price point!
Nevertheless, while it may be a sub-optimal tool to make a Litecoin price prediction, the reality is few good tools exist. And one of the reasons for significant price volatility in cryptocurrencies is precisely because no easy way exists to value them.
Litecoin Price Prediction: What Would Warren Buffett Say?
Famed investor Warren Buffett wasn’t shy about making his opinions known about cryptocurrencies.
He stated that investors should “stay away” from Bitcoin. In 2014, he continued “it’s a mirage basically. The idea that it has some huge intrinsic value is just a joke, in my view.”
Buffett didn’t make his arguments without justification. He claimed that “you can’t value Bitcoin because it’s not a value-producing asset.”
Just like gold, Bitcoin, Litecoin, and other cryptocurrencies don’t produce dividends for investors.
When a company issues a dividend, you can build a financial model that predicts into the future how much the company will earn in total and discount that back to calculate a present value for the company.
But cryptocurrencies are only worth as much as some other investor will pay in the future.
Buffett has historically argued that if you could buy all the gold in the world or all the real estate in the United States, you should choose the real estate because you can rent out the properties to tenants and earn a steady stream of income.
However, gold and cryptocurrency values are based on the value another investor will pay you tomorrow.
While Buffett’s arguments have merit, he also admitted to having missed out on Alphabet and Apple, leading technology companies.
Indeed, he is famous for shunning technology companies because he doesn’t understand them.
Litecoin Price Prediction: What Would John McAfee Say?
By sharp contrast to Warren Buffett, John McAfee has argued that cryptocurrencies are a positive game-changer.
He predicts Bitcoin will rise to a value of $1,000,000 per coin by 2020. That is a 50x increase over current prices for Bitcoin (at the time of writing).
And if Litecoin were to rise by a commensurate amount, it would increase to approximately $15,000 per coin from around $300.
Take that prediction with a pinch of salt because John McAfee is one of the biggest Bitcoin miners in the United States, so it is very much in his interests for the price of all cryptocurrencies to rise, especially Bitcoin.
Litecoin Price Prediction:
Arriving at a Litecoin price prediction is a difficult task. If you were to believe Warren Buffett’s argument that cryptocurrencies produce no dividends, you may be inclined to dismiss them altogether.
However, if you were to follow the comments of John McAfee, one of the largest Bitcoin miners, you may believe a 50X increase in value is possible.
According to Brownian motion models, the Litecoin price prediction range through November, 2018, is from $6 to $507 with 95% confidence. And while statistical wizards may argue that the model is wrong, it’s hard to find a better one.
Even calculating the market share of cryptocurrencies relative to conventional currencies is challenging because assumptions have to be made about how much market share they can take and whether Litecoin will establish itself as prominently as Bitcoin and Ethereum.
The bottom line is it’s nearly impossible to accurately arrive at a Litecoin price prediction forecast so any investments you make should be done in consultation with a financial advisor, and should be considered speculative.
The following article was republished with permission from Investor Mint.