Litecoin Price Analysis – Retest of all time highs on the horizon

Litecoin (LTC) has remained stable throughout the recent Bitcoin bull run. The cryptocurrency is now seventh by market cap, at US$3.77 billion, with US$230 million in trading volume over the past 24 hours. LTC has risen 111% since the lows in mid September and is up 1488% this year.

LTC is a Bitcoin clone created in 2011, with four times the total coin supply, and block times of 2.5 minutes allowing for quicker transaction confirmations. Compared to coins above LTC in market cap, LTC consistently has more transactions per day, which suggests it is undervalued based on utility alone.

Hashrate and difficulty have continued to increase throughout the year, suggesting sustained interest from miners even though other coins are more profitable. The Litecoin block reward is due to decrease from 25 to 12.5 coins around August 2019.

The Litecoin Rich List, suggests that most addresses hold less than 100 LTC, with very few addresses holding a majority of the coins. This suggests some degree of centralization of holdings, but also suggests a majority of users are minimally holding LTC. As these addresses shift towards more users buying and holding more coins, prices should theoretically increase. It’s also possible that many users see LTC more of a coin to spend and less of a coin with store of value potential.

This is admittedly not the best metric because a user can store 100 coins in 100 wallets or 1 addresses with no easy way of differentiating between the two. The largest addresses also tend to represent exchange cold storage.

LTC trading volume has been led by the US Dollar (USD) and Bitcoin (BTC) pairs on GDAX and Poloniex respectively. GDAX holds more than 50% of the USD volume, which can be attributed to a direct fiat on-ramp for customers through Coinbase, as well an increase in institutional trading on the exchange.

Litecoin creator Charlie Lee recently expressed his excitement regarding Confidential Transactions, which will be coming to Litecoin “when it is ready.” Lee argues that “fungibility is the only feature of good money that Bitcoin/Litecoin is missing.” These transactions are already being researched on Bitcoin, and are already offered on a host of other coins including DASH, ZEC, Monero, and PIVX.

A key property of fiat currency, fungibility, helps prevent specific coins or notes from being blacklisted from use, or tracked from person to person. Once the funds enter a bank account or are marked for identification, this is a different story. Any crypto payment is also interchangeable from any other, but most payments can be tracked the same way or using chain analysis. This makes most cryptocurrency transactions pseudonymous, and not anonymous.

Technical Analysis

LTC has experienced a continued rise after the explosive breakout in April. Most of this bull trend has held above the daily 50EMA, strongly suggesting continued bullish bias. A test of the 200EMA in mid September held strongly with a rejection wick of the lower price.

Fibonacci Extensions from the all time high, ~US$100 in late august, to extreme low, ~$33 in mid September, suggest a target of US$140. After multiple rejections at the 50% retracement level, price broke out seven days ago and now looks likely to retest all time highs.

A Pitchfork, which uses three anchor points to predict a price channel with diagonal potential reversal zones, shows price flirting with the bottom diagonal channel. Traditionally, as price closes outside of the Pitchfork, the channels become and void. However, price has returned to the lower channel. Based on the median line (red), trend mean reversion would currently suggests a target of US$130.

Ichimoku Cloud on the daily chart, with the faster singled settings (10/30/60/30), show all Cloud metrics bullish, with a Kumo breakout five days ago. This is the exact signal to use for a long entry.

Ichimoku Cloud on the daily chart, with doubled settings (20/60/120/30) for a more accurate and smoother signal, show all Cloud metrics bullish except the Cloud itself. A long entry would trigger with these settings as soon as the cloud flips bullish.

Conclusion

Based on network utility and mining support, Litecoin is heavily undervalued. With continued development by Charlie Lee and the Litecoin Core team, including Lightning Network and Confidential Transactions, improvements in the protocol will begin to set Litecoin apart.

Technicals suggest a strong recovery from the mid September low, now with renewed momentum for a retest of all time highs. Fib extensions and Pitchfork suggest a run towards US$140.

IMPORTANT: Information provided is for educational purposes only and does not constitute investment advice. Readers should always conduct their own due diligence before making any investment decision.