Tracing to June 2022, Litecoin (LTC) has displayed a steady upward trend from its two-year low, carving out an ascending channel for nearly a year. The ascending channel is like a rising staircase—when the price action oscillates between two upward-sloping lines, it indicates a long-term bullish phase. However, market patterns are cyclical; what goes up might eventually come down, and a reversal could be imminent.
LTC's upward movement notably faced resistance in the $89-$94 zone over the last four months. The bulls, seemingly exhausted, gave way to a somewhat bearish dominance. A significant point of reversal was the long-term trendline resistance—visualize it as a boundary that the price struggles to surpass, indicating possible bearish implications.
Interestingly, the price is pulling back from this trendline resistance, overlapping with the $89-$94 high liquidity region. Despite this, LTC's price has closed above the 20 and 50 Exponential Moving Averages (EMAs). The EMA, an average of recent price data, is a handy tool for spotting market momentum. A bullish crossover signals an underlying bullish momentum when the 20 EMA (short-term) rises above the 50 EMA (long-term).
The Relative Strength Index (RSI), a momentum oscillator, recently crossed the 50 mark, suggesting a shift in market control to the bulls. However, the subsequent dip represents a bearish divergence—when the price rises, but RSI falls, indicating the bears might regain control. Traders could flip the script if RSI climbs back above 50.
Adding another layer to the analysis, the On-Balance-Volume (OBV) indicator has been making higher highs. In contrast, the price is making lower highs—a bearish divergence hinting at a potential price drop.
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Understanding the 'Average Transaction Fees' (ATF) metric is crucial—it represents the average cost of a transaction on the network.
Interestingly, the ATF for Litecoin dropped drastically in late April. Although LTC’s price has been sensitive to this metric in the past, the recent ATF drop did not trigger a proportionate price fall. If past patterns hold, we could be eyeing a price decline.
Another important metric is the Daily Active Address (DAA) count, indicating network health. Simply put, a spike in DAA often reflects an increase in network activity and can influence LTC’s price.
In early May, LTC saw a significant rise in DAA. While this typically suggests increased user engagement and potential bullish action, the price has not mirrored this surge. We might witness a near-term price rise before a potential reversal if this lag ends.
Bringing it all together, the overall sentiment is leaning towards neutrality. However, any abrupt market move could trigger a rally in the coming period.
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As we forge ahead, the LTC price continues to float near the EMAs, signaling a phase of low volatility. For beginners, low volatility denotes a stable price movement with lesser fluctuations, which may be a precursor to a high volatility phase marked by sudden and significant price changes.
Given the current market conditions, a decisive reversal from the $94 resistance level might spur a near-term price decline. Traders should watch for a sustained close above the 20/200 EMA, suggesting bullish potential in the immediate term.
Breaking above the $94 mark and the bearish trendline resistance could trigger a bullish break and help buyers reclaim control in the short-to-medium term. Conversely, a close below the long-term ascending channel could kickstart a bearish price discovery in a bearish scenario, targeting the first significant support level of around $68.
Remember, it's crucial to collectively consider all these factors—sentimental, technical, etc.- rather than in isolation to shape a comprehensive market outlook.
Considering the above analysis, it's clear that LTC exhibits potential yet holds its fair share of risk. The key lies in observing the discussed metrics and identifying trend changes. Litecoin has shown resilience in the face of adversity.
Yet, the future largely hinges on market sentiment, technical indicators, and, notably, Bitcoin's movement, given the strong correlation between BTC and LTC. Therefore, any investment decision should be accompanied by a well-rounded examination of these variables. Moreover, the Okto DeFi app is a safe alternative on your mobile to store several coins, including LTC tokens. This app also lets you explore many DeFi investment options, all in one place.