Litecoin didn't really aim to do anything, it just acted as a hedge because people were using it that way. It kind of explains the questions you have...

...because during that month or so, both LTC and BTC rose against the USD. It wasn't like you lost out by taking shelter in LTC, because even when it's BTC price fell, the value of the coin was actually rising. Whereas if it was tied to gold or USD, Bitcoin could have gotten out of reach.

It's not that the currency has to be stable, it just has to react different to the rest of the market. Again, it's difficult to explain.

Also, you really don't have to be that fast to not lose out, even during minor crashes you can still make money if you pay attention to the news and the charts, I lost some on this last crash, but when BTC started to recover I actually gain value in my portfolio because I'd been buying the dips.