Litecoin (LTC) has rebounded by 130% to virtually $100 after bottoming out close to $40.50 in June 2022. The main causes embody broadly bettering risk-on sentiment and euphoria round Litecoin’s upcoming halving in August 2023.
However, technicals recommend that LTC could wipe out most of those beneficial properties within the coming months.
LTC value paints large bear flag
Litecoin stands to pare its beneficial properties primarily on account of a large bear flag on the weekly chart.
A “bear flag” is a bearish continuation sample that happens when the value consolidates inside an ascending, parallel channel after present process a powerful downtrend. It resolves after the value breaks under its decrease trendline with an increase in buying and selling volumes.
Litecoin has been portray the same sample since early June 2022. Previously, the LTC/USD pair had undergone a 70% value correction from $130 to $40.50. Thus, from the technical perspective, it might resume its downtrend course if its value breaks under the decrease trendline.
LTC/USD weekly value chart that includes bear flag breakdown setup. Source: TradingView
As a rule, a bear flag breakdown transfer prompts the value to fall by as a lot because the earlier downtrend’s size. Applying the identical setup to Litecoin brings its bear flag draw back goal to just about $30.50, or 65% decrease than the present LTC value.
Litecoin value “head pretend”?
As stated earlier, Litecoin‘s value restoration has primarily occurred in step with related strikes throughout the risk-on market on account of cooling inflation.
For occasion, the Nasdaq-100 inventory market index has risen roughly 15.50% between October 2022 and January 2023. Similarly, Bitcoin (BTC) has rallied by greater than 50% since its November 2022’s low of round $15,500.
The weekly correlation coefficient between Litecoin and the Nasdaq-100 has been largely constructive at 0.35 on Jan. 27. Similarly, the correlation between Litecoin and Bitcoin is now round 0.21.
Litecoin’s weekly correlation coefficient with Nasdaq-100 and Bitcoin. Source: TradingView
But Mark Haefele, the chief funding officer at UBS Global Wealth Management — together with different many different analysts — has famous that the continuing risk-on rally may very well be a “head pretend.” In easy phrases, the continuing Litecoin rally, underneath the affect of its risk-on counterparts, may very well be short-lived.
Independent market analyst Capo of Crypto additionally agrees, noting:
“The means the upward motion is going on, the way in which [higher-timeframe] resistances are being examined… it clearly appears to be like manipulated, no actual demand. Once once more, the largest bull entice I’ve ever seen.”
Bullish state of affairs for Litecoin
However, not everyone seems to be bearish on danger belongings reminiscent of Litecoin. Popular market analyst Rekt Capital sees Litecoin rallying towards $160 within the coming weeks, citing a month-to-month chart setup as proven under.
LTC/USD month-to-month value chart. Source: TradingView
Notably, the chart reveals LTC‘s value present process a powerful rebound transfer after testing a multiyear ascending trendline resistance contained in the $40 to $50 space, which might qualify it for an additional uptrend towards the $120–$160 vary.
These upside targets have beforehand acted as helps and resistances. Breaking this key resistance might due to this fact invalidate the bear flag setup, which occurs 54% of all time, based on analysis by veteran investor Tom Bulkowski.
This article doesn’t comprise funding recommendation or suggestions. Every funding and buying and selling transfer entails danger, and readers ought to conduct their very own analysis when making a choice.