Litecoin (LTC), the silver to Bitcoin’s gold, made the headlines after it reached a record high of over $400 in May 2021. This rally was fueled by the overall bullish trend in the cryptocurrency market.
Nonetheless, the Litecoin rally did not last long. Litecoin tanked down to around $180 at the end of May. Currently, LTC is trading hovering near the $140 price point, according to CoinMarketCap.
Your head must be buzzing with a lot of questions. What fueled the Litecoin uptrend? Why did it take a steep nosedive? How is Litecoin performing now?
Read along; this post will answer all these questions.
Here’s how we will progress in this post –
Firstly, we will discuss what Litecoin is. Once we are familiar with the cryptocurrency, we will take a detailed look at the Litecoin rally and downtrend. Lastly, we will look at Litecoin’s current performance, followed by an analysis of the overall market sentiment on cryptocurrencies.
Let’s get started!
Litecoin is a cryptocurrency that provides fast, secure, and low-cost payments. It was created in 2011 by Charlie Lee, a former Google Employee.
Technically, Litecoin is built on top of Bitcoin code with some major improvements to make the protocol more efficient. For instance, Litecoin transactions are 4 times faster than Bitcoin. Litecoin adds a new block every 2.5 minutes as opposed to 10 minutes of Bitcoin. Plus, Litecoin transactions are cost-effective, making them ideal for micropayments. Thanks to this, nearly 2000 merchants and stores across the globe accept Litecoin as of January 2021.
Moreover, the mining process in proof-of-work blockchains like Bitcoin, is prone to centralization. To combat this, Litecoin uses a memory-hard problem called Scrypt. Litecoin also supports Atomic Swap enabling the cross-chain exchange of cryptocurrencies.
Now that you know what Litecoin is, let’s discuss what’s currently happening in the Litecoin market.
On May 10, 2021, Litecoin (LTC) crossed the $400 mark on Bitstamp; it was trading at $414 per coin. Litecoin, currently the 13th largest cryptocurrency by market cap, gained 215% than it was at the beginning of 2021. It skyrocketed from $124.42 in January to a new high of $413.90 in May.
Currently, Litecoin is priced at $140 per unit, according to CoinMarketCap data.
Litecoin’s rally was a result of the bullish trend in the cryptocurrency market. Rival cryptocurrencies including Ethereum (ETH), Ripple (XRP), Cardano (ADA), and many others recorded skyrocketing profits. Dogecoin (DOGE) emerged as the winner gaining over 17,000% year-to-date during this period.
The chief operating officer of OKCoin, a crypto services business based in San Francisco, highlighted the inverse correlation between Litecoin and Dogecoin. He pointed out that the DOGE/USD exchange rates reduced by 12% when the LTC/USD exchange rates rallied by 12%.
Litecoin Dominance Index, a metric that calculates Litecoin’s strength against other cryptocurrencies, saw an increase from 0.96% on May 9 to 1.11% on May 10. This indicates that the market sentiment shifted towards Litecoin as other alternative cryptocurrencies showed bearish signs.
Nonetheless, the Relative Strength Indicator (RSI) signals that Litecoin was overbought during the rally, predicting a downtrend.
The LTC/USD daily chart during Litecoin’s May rally had an RSI score of 79.02. For a little background, RSI above 70 indicates that the asset is overbought and will drop in value. Litecoin’s RSI seems to be 9 points above the overbought limit, indicating a price correction.
As of June 30, 2021, Litecoin is facing strong resistance at the 20-day EMA. It is currently trading around $140 per unit. Considering this price movement, it is clear that the market sentiment remains bearish for LTC, and traders are selling their LTC holdings at strong resistance levels.
If Litecoin takes another nosedive, the bears will attempt to drop the LTC/USDT pair below $118 support. As a result, the LTC/USDT pair will make a descending triangle pattern, thereby intensifying the selling, and Litecoin might hit the floor while trading between $70-$100.
If Litecoin manages to take a strong bounce back off the $118 mark, it will break the bearish trend. This will trigger a rally that might hit $225.
Despite the technicals indicating a downtrend, the macroeconomic catalysts support the crypto market.
According to the study conducted by Charles Schwab, 51% of millennials and Gen Z investors prefer cryptocurrencies over traditional stocks. One of the major reasons behind them favoring digital assets is the COVID-induced inflation and the fear of dollar devaluation.
Also, central banks around the world are easing monetary policies to revive the economy from the pandemic. This, in turn, is also favoring crypto adoption among the young population. For instance, the United States Federal Reserve will continue its $120 billion monthly asset purchase program with benchmark rates near 0 until 2023. As a result, the opportunity costs of holding assets like bonds and dollars have dropped. Thanks to this, people are investing in digital assets such as cryptocurrencies.
The cryptocurrency market is a highly volatile space. As a result, the crypto price charts are constantly overwhelmed with rapid price fluctuations. In the past few months, Litecoin charts are all red and green.
On May 10, 2021, Litecoin saw a massive uptrend breaking its all-time high and reaching above $400. Nonetheless, Litecoin erased its gains after it tanked down at the end of May. As of now, Litecoin is trading at $140.
Nonetheless, the overall sentiment is still positive for cryptocurrencies.
Let us know in the comments what your opinions are on the recent LTC movements. Will you invest or wait for Litecoin to become stable?