- Litecoin price shows a bearish divergence developing on the daily timeframe, hinting at an incoming sell-off.
- On-chain metrics reveal that 22% of LTC holders are profitable, further depicting the shorter-term bearish outlook.
- A breakdown of the $55.23 level will create a lower low, invalidating the longer-term bullish outlook.
Litecoin price embarked on an incredible rally after the FTX-induced crash bottomed on November 9. Due to the explosive moves, many investors are in profit. However, a minor retracement might be necessary for further extension of this move.
Litecoin price needs to cool down
Litecoin price appreciated by 75% in two weeks, starting November 9. This massive rally seems to be experiencing a lack of bullish momentum, pausing its uptrend. As LTC bounces off the $73.10 support level, investors need to consider two things - a minor retracement or a trend continuation.
While the latter is possible under strict conditions, the former seems more likely to occur for two reasons.
The bearish divergence developed between November 6 and 23’s higher highs and the Relative Strength Index’s (RSI) lower lows in the same period. This discrepancy hints that the momentum is waning, but the price increases due to inertia. However, this uptick in Litecoin price is unlikely to sustain forever, so market participants must prepare for a trend reversal.
Hence, a breakdown of the $73.10 support floor will likely see Litecoin price revisit the midpoint of the 75% upswing at $65.63. A sweep of the $61.30 and $58.24 levels might occur in some cases.
Traders should expect a 15% to 24% downswing for LTC. This pullback, however, does not indicate the end of the uptrend. On the contrary, a quick recovery above $65.63 will mean that the bulls are still in control.
In such a case, investors can expect Litecoin price to take off from $65.63 and retest the $96.30 hurdle, bringing the total gain to 47%.
LTC/USDT 1-day chart
Further adding credence to the possibility of a downtrend is the 30-day Market Value to Realized Value (MVRV) indicator. This on-chain metric determines the average profit/loss of investors that purchased LTC over the past month.
Currently, this index is hovering around 22%, suggesting that the average profit of all the investors that purchased LTC in the last month is 22%. If these holders decide to book profit, it could add selling pressure to the mix and trigger a correction.
LTC 30-day MVRV
While things are looking bearish in the short term, the long-term picture of Litecoin price is looking good, with LTC potentially trying to revisit $100. However, if the pullback fails to recover above $65.63 and produces a daily candlestick close below the $55.23 level, it will create a lower low and invalidate the bullish outlook.
Such a development could see Litecoin price crash by 15% and retest the $47.60 level.
Here's how Bitcoin price moves could affect Litecoin price
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.