• Francisco Hernandez

Litecoin (LTC): Where there is blood, there are buyers.

Introduction

Since I last wrote about Litecoin (LTC) on March 6th, 2020, a number of world events unfolded. To start, Coronavirus (COVID-19) was declared a world pandemic by the World Health Organization (WHO) on March 11th, 2020. Shortly thereafter, governments across the world issued stay at home orders, social distancing and mask mandates, and called for the closure of non-essential businesses. This had significant economic effects across many countries. In the United States, for example, 26 million people have as of now filed for unemployment. Lastly, governments, such as in the United States, have scrambled to pass legislation to print trillions of dollars to prevent imminent economic collapse, going so far as to depositing money directly into American's bank accounts. These world events have certainly affected cryptocurrency markets, along with many other markets. In this article, I examine how Litecoin has reacted to these events.

Chart since last Litecoin article, LTC-USD, 1D, BTSE.


Moving Averages (MA)

The day after my previous article (i.e., 03.06.2020), Litecoin (LTC) took a big fall. The price started to drop a few days before COVID-19 was officially declared a world pandemic. Perhaps it was due to the death cross that was forming with the 20- and 50-day MA (red and orange, respectively). Initially, I spotted support at the 200-day MA (green). The death cross got the better of it and crashed the price down. Then, as can be seen with the largest red candle below, price fell dramatically after the WHO made their announcement.


This massive price drop drove the 20-day MA past both the 200- and 100-day MA (yellow), establishing a new yearly low at $25.06. Litecoin has since recovered partially. Price is currently sitting on top of both the 20- and 50- day MA, forming a golden cross. Should Litecoin close in this position, it will have a good chance at establishing support along the 20-day MA. Resistance is at the 200-day MA in the lower $50's.

Moving averages.


Bollinger Bands (BB)

At the beginning of March, Litecoin (LTC) price was approaching the middle band (i.e., 20-day MA, red). At the time, it seemed Litecoin had a decent chance at making it through; however, it was rejected. Price then converged with the lower band (white), rode it down, and settled out near the start of April. Price made it past the middle band and even broke out of the upper band (white) on April 7th. Price retraced and has since been bouncing over and under the middle band. Currently, price is sitting on top of the middle band. As mentioned above, if price closes over the middle band, it will allow for the opportunity to establish support. If not, prices could remain in the lower band or continue to test it the middle band as support over the next few days.

Bollinger Bands.


Fibonacci retracements

Litecoin (LTC) fell with such velocity it made a 100% retracement in price, crossing the low established just days before the New Year in December 2019. That low, $35.94, appears to be like levels of support established in the past, such as the low in December 2018. Currently, price is above the 100% Fibonacci retracement level. Price tested the 78.6% level around April 9th but was rejected, with price peaking at $47.70. Price has since then approached the 78.6% level but has yet to touch it. In other words, $46.30 will clearly act as resistance. Support can be considered to have been established at the end of March, where price tested the 100% retracement area several times. It would be ideal for price to close above the previous peak high.

Fibonacci retracements.


On Balance Volume (OBV)

The OBV also reacted to the world's events. However, the OBV rose all throughout the end of March and into the first week of April. This indicates there was increased buying pressure at Litecoin's lowest price of the year so far. The OBV retraced in week two and three of April but did not make a lower low as compared to near St. Patrick's Day. Currently, the OBV is pointing upwards, however, is still in the negative range. Litecoin would need to see consistent and significant buying pressure to make any large move. It would be ideal for the OBV to continue at current level or make higher moves.

On Balance Volume.


Chaikin Money Flow (CMF)

The CMF tells a similar story as the OBV. It too bottomed in March and peak in April. It currently is pointing upward but is positioned below the zero line. It's pretty darn close though. The CMF is poised to break past the zero line in the coming days. Given the CMF is so close to the zero line it could indicate buying pressure may start to increase. However, if the CMF is below the zero line, then selling pressure is stronger.

Chaikin Money Flow.


MACD

The MACD, along with the previous two indicators, have been rising since the current bottom in 2020. The MACD line (blue) crossed over the signal line (red) just after mid-March and has since remained above it, testing the signal line several times in the last two weeks. Both the MACD and signal line are located just under the zero line. Just like the CMF, the MACD looks about ready to break to the upside.

MACD.


Conclusion

Litecoin (LTC), along with other assets, were hit hard amid all the world's events (i.e., COVID-19, quarantine's, unemployment, inflation, etc.). However, these events create a rich environment for Bitcoin (BTC) and cryptocurrencies, such as Litecoin. Litecoin is deflationary, just like Bitcoin, hence, making it a better option for storing value than in USD. This ethos of Bitcoin and cryptocurrencies is what drives individuals to buy when there is blood in the streets. This may explain why Litecoin's price has recovered ~74% from the 2020 bottom. Given that price is currently above both the 20- and 50-day MA's and each indicator is pointing upwards, Litecoin appears to be poised for an upward move. Lastly, the Bitcoin halving is approaching around May 12th, 2020. It is unclear how the Bitcoin halving will affect the Litecoin market and, considering Litecoin and Bitcoin are correlated, the effects of the halving should be considered as a topic for future discussion. Given the current times, the Litecoin market will be volatile. It seems like breaking headlines are now an everyday occurrence, so naturally markets react. Everyone be safe out there and happy trading.

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