What happens if a government or billionaire buys and holds 90% of litecoins, artificially reducing supply?

Can happen, but then disposing of the stock will be a problem. Just like you have artificially inflated the price, by introducing scarcity, without liquidity in the market, the price will stay up, but then it will take a long time for you to clear all the stock you have held, and the more you sell, the more liquid the market becomes thus reducing your ability to manipulate the market. Day traders could adversely go against your strategy.