The recent run-up in prices for both bitcoin and litecoin has presented traders with an interesting dilemma for maximizing profits. Bitcoin’s price has jumped by more than 1,400 percent since the start of this year, while litecoin has racked up gains of over 4,000 percent during the same time. Given litecoin’s higher price gains, should investors switch funds from the original cryptocurrency, bitcoin, to its derivative, litecoin? 

An Unequal Comparison 

At the outset, it is difficult to compare both cryptocurrencies using the same set of criteria, since they serve different purposes. According to Charlie Lee, litecoin’s creator, his cryptocurrency is the silver to bitcoin’s gold. In simple words, litecoin is a currency created for daily transactions to complement bitcoin’s status as a store of value. (See more: Litecoin Creator Calls for Caution as Price Soars.)

That said, certain common factors contribute to cryptocurrency price movements. 

Media commentary is one. Everyone, from world leaders to prominent economists to government regulators, seems to have an opinion on bitcoin. Feverish speculation on the cryptocurrency’s price and countless media mentions have popularized it to mainstream investors and propelled its price to record highs, resulting in a futures listing debut.  

On the other hand, litecoin has mostly maintained a low profile, coasting on the back of incremental gains from bitcoin's rise. A look at its price chart for 2017 reveals that significant increases have occurred in short spurts on the back of information about technology upgrades or other news. In fact, the cryptocurrency’s most recent spike was preceded by a CNBC interview with Lee.

Along those lines, billionaire Mike Novogratz appeared on CNBC yesterday to proclaim that the litecoin price increases didn’t have the legs of a bitcoin rally. Litecoin’s price, which more than doubled its value in the last two days, has declined by 2.36% in the last 24 hours. In the meanwhile, debates about bitcoin’s utility are still in the air.  

Network effects are another important evaluation factor for price analysis. A cryptocurrency derives legitimacy from widespread use by merchants and customers. This is quantified in its daily transaction volumes.

Litecoin’s transaction volumes spiked last weekend. There are two possibilities for the sudden spike: a surge in trading activity for the cryptocurrency, or the digital currency could have gained a new market of enthusiastic crypto converts. Based on news reports, the second possibility seems dim. It is likely that trader interest in litecoin accounted for a major part of yjr increase in transaction volumes in the last couple of days. (See more: Litecoin's Phenomenal Year.)

Bottom Line

In the short term, traders may have missed the boat on litecoin’s rally. But the coin may be a good bet over the long term, given its advantages over bitcoin as a payment network. In fact, litecoin creator Charlie Lee has alluded to the time frame in a Youtube interview. “It will take many years before this vision of mine (as a cryptocurrency for daily use) happens,” he said.