Litecoin Price Analysis – Technical indicators suggest an active bear trend

Litecoin (LTC) has dropped 40% over the last month, largely correlating with most of the other crypto markets. The LTC market cap now stands at US$5.96 billion, sixth overall behind EOS. Exchange-traded volume in the past 24 hours is US$378.55 million.

The number of transactions per day has decreased dramatically since December and January and is back to pre-December levels. Average transaction fees have also declined over the same time period. LTC continues to clear more transactions per day than Bitcoin Cash, Monero, Zcash, and Tron while the fees are cheaper than Bitcoin, Ethereum, and Monero.

LTC’s 30-day Kalichkin network value to transactions (NVT) ratio is among the lowest of all coins, based on available data, suggesting the coin is underpriced based on its utility. The only coins with a lower NVT are Doge, Cardano, NEO, Bitcoin, EOS, and Decred. While the ratio can be used to assess a network’s relative utility over time, it’s difficult to compare between coins which use different transaction types. Despite a relatively low NVT, the ratio is still increasing. A downward trending NVT also correlates with increasing prices.

Difficulty and hash rate continue to make record highs, with the next block reward halving set for August 2019. Of the 84 million LTC to ever exist, 67.78% has been mined. Hash rate will continue to increase with scrypt ASICs being widely manufactured. Mining profitability continues to push all-time lows (not shown). There are 261 public nodes and the top 100 accounts hold 45% of the total supply. Litecoin Core released an update on May 31st which included new features, various bug fixes, and performance improvements.

Exchange traded volume during the past 24 hours has been predominantly led by the Bitcoin (BTC), Tether (USDT), and U.S. Dollar (USD) pairs. The majority of trading has occurred on OKEX, GDAX, Bitfinex, and Binance. Overall, the influence of Asian pairs is minimal with Korean Won (KRW) and Japanese Yen (JPY) representing less than 1% of total volume.

Technical Analysis

Most of the cryptocurrency market has moved collectively over recent days. The Pearson Coefficient of LTC and BTC has been 0.8230 since mid-December, suggesting the two coins are highly correlated statistically.

The status of any existing or emerging trend can be determined using Exponential Moving Averages, Ichimoku Cloud, Pitchforks, and chart patterns. Further background information on the technical analysis discussed below can be found here.

The Exponential Moving Averages (EMAs) on the one and two day chart are beginning to show bearish sentiment. On the one day chart, the 50/200EMA cross holds a bearish cross with price far below the 200EMA. On the two day chart, 50/200EMAs are squeezing with price already below the 200EMA. These represent the first EMA crosses on either time frame since April 2016. Open interest on Bitfinex is leaning bullish, with more shorts being added recently (not shown).

The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

The status of the current Cloud metrics on the daily time frame, with doubled settings (20/60/120/30) for more accurate signals, are entirely bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and price.

Price has experienced several Tenkan bounces on the daily, these are particularly bearish. A traditional Cloud long entry signal will not occur until price is above Cloud with volume. The flat Kumo at US$180 should be considered high probability targets if price breaches Cloud resistance.

The status of the current Cloud metrics on the twelve hour time frame, with doubled settings (20/60/120/30) for more accurate signals, are also entirely bearish; price is below Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and price. Again, a traditional Cloud long entry signal will not occur until price is above Cloud with volume.

A Pitchfork with anchor points in December and February shows that price is bound in a bearish trend. The price reaction to the diagonal support and resistance lines, as well as the attraction to the median line (ML), increase the validity of this Pitchfork. Price will continually attempt to return to the ML until breaking above or below the Pitchfork. Breaking above the yearly pivot at US$216 would also be conclusive bullish invalidation of this downward trend.

On the daily chart, price has built a multi-month descending triangle with a descending volume profile, which appears to be breaking out to the downside. Over 2/3rds of the triangle has complete, giving credence to the validity of this breakout. Buyers will likely come in at US$90 and US$60 which both represent monthly pivots.

Alternatively, on the three day time frame, there is the potential for a large bullish reversal pattern, the falling wedge, which would not likely break until late July at the earliest. The pattern yields a measured move and 1.618 fib extension near US$565. The yearly R2 pivot (not shown) is also positioned at this price, suggesting confluence with the target.

Conclusion

LTC continues to quietly chug along with more favorable network usage statistics than most other coins. Low cost transaction fees and fast block times remain the essence of LTC’s competitive advantage. The Litecoin core team also recently released an update suggesting that development on the project has not stalled.

Technicals suggest an active bear trend with no imminent reversal. EMAs, Cloud, and Pitchfork are all decidedly bearish. A counter trend bullish reversal would become likely if price falls quickly between the US$60-90 zone. If the current low holds, a larger reversal pattern is possible with the likelihood of a bullish reversal near September.

Most of the cryptocurrency market has moved collectively over recent days. The Pearson Coefficient of LTC and BTC has been 0.8230 since mid-December, suggesting the two coins are highly correlated statistically.