Litecoin Price Analysis – Bull trend losing steam

Litecoin (LTC) now has a market cap of US$2.68 billion, up from US$206 million in April of this year. After posting a new all time high in the beginning of September, the market has retraced and largely trended sideways.

Litecoin hash rate and difficulty continue to rise steadily on the SegWit enabled network. The Litecoin block reward is due to halve around August 2019. LTC transfers about a tenth of the transactions processed by either Bitcoin (BTC) or ETH per day.

Charlie Lee, creator of LTC, continues to experiment with atomic swaps, most recently completing a successful BTC < > LTC swap. Previous successful LTC atomic swaps have included Decred and Vertcoin.

Atomic swaps are on-chain exchanges for two different cryptocurrencies. All of the previous atomic swaps were done without SegWit or the Lightning Network (LN), both of which will be needed to create these swaps at scale with ease of use.

According to the ambitious LTC 2017 roadmap, LN integration is listed among numerous other projects. LTC may be the first LN enabled network, allowing for even cheaper transactions through off-chain bidirectional hub and spoke payment channels.

Another upgrade due for the network is Merkelized Abstract Syntax Trees (MAST), which helps improve flexibility, scalability, and privacy mainly by improving smart contract possibilities.

Example Mast Structure

LTC exchange-traded volume has been led by Bitcoin (BTC) and US Dollar (USD) markets over the past 24 hours, with most of that volume coming from Bitfinex and Poloniex respectively.

The Chinese Yuan (CNY) pair commands a negative premium compared to the index, suggesting sustained selling with a lack of demand. Conversely, the South Korean Won (KRW) pair holds a premium, suggesting sustained buying. In both cases, the differentials suggest difficulty with arbitrage in those countries.

Technical Analysis

Based on the lack of volatility, it is important to determine the potential direction for a move as early as possible with a reasonable degree of certainty. Ichimoku Cloud, EMAs, and Bollinger Bands all provide signals of actionability.

The Cloud on the daily chart, using singled settings (10/30/60/30) for quicker signals, continues to show bearish signals. Price is below Cloud, TK cross is bearish, and future Cloud is bearish. A bullish reversal to US$66.10 is possible if the current range does not make lower lows. There is also a potential bear flag building, a bearish continuation signal, on declining volume.

The Cloud on the daily chart, using doubled settings (20/60/120/30) for more accurate signals, also shows a completely bearish picture. There is a large TK disequilibrium suggestive of a return to mean around US$65.73, which has an opportunity to occur through the Kumo twist on October 27th.

The Cloud on the four hour time frame is entirely mixed. A bullish or bearish entry would trigger when all Cloud metrics align, likely upon triangle resolution. Kumo edges of US$58 and US$66 are immediate bullish targets should a reversal occur.

The 50/200EMAs on the daily have been flattening for some time, suggesting a decrease in trend momentum. The 200EMA acted as support on a large retracement on September 15th. Because price is above the 200EMA, the trend remains bullish. A candle close below the 200EMA and then a subsequent bearish 50/200EMA Death Cross would begin a bear trend.

Despite the relatively turbulent uptrend on the four hour, the 50/200EMAs have not crossed and recrossed too frequently. This suggests that any subsequent crosses should be seen as actionable signals. While the EMAs are currently crossed bearish, a candle close above the 200EMA followed by a 50/200EMA cross should be considered a long entry signal.

The daily Bollinger Bands (BBands), a measure of volatility, have tightened significantly since the all time high, on declining volume. A candle close above or below the BBands, on volume, will likely set a new interim trend. Price has been weaving above and below the 20SMA for the past week so there is no clear prediction in the direction based on BBands alone.

Ultimately, the LTC/USD pair is most likely driven by the LTC/BTC pair which is currently in a large zone of consolidation on declining volume. The pattern represents a bullish channel with a target of 0.045BTC. Price is also at the bottom of that channel, a location where aggressive traders will likely buy and take advantage of the multi-week support zone.

Conclusion

Although the entire LTC roadmap will likely not be completed by year’s end, Charlie Lee’s experimentation with atomic swaps and leadership to drive LTC towards a SegWit enabled network have paved the way for cryptocurrency ingenuity. Because of politics among BTC factions, LTC will likely be the first for many network upgrades including LN and MAST. In this respect, LTC acts as a living breathing BTC test net. Success on any front creates further pressure for other cryptocurrencies to continue to adapt.

Technicals show a momentum-less bull trend under heavy consolidation. Immediate targets include US$58 and US$66 as well as a longer term target of 0.045BTC. Aggressive traders will be entering positions on the bullish alignment of the four hour Cloud metrics and 50/200EMA cross.