Litecoin ‘head fake’ rally? LTC price technicals hint at 65% crash

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Litecoin (LTC) has rebounded by 130% to almost $100 after bottoming out near $40.50 in June 2022. The primary reasons include broadly improving risk-on sentiment and euphoria around Litecoin’s upcoming halving in August 2023.

Nevertheless, technicals counsel that LTC could wipe out most of those beneficial properties within the coming months.

LTC value paints big bear flag 

Litecoin stands to pare its beneficial properties primarily attributable to an enormous bear flag on the weekly chart.

A “bear flag” is a bearish continuation sample that happens when the worth consolidates inside an ascending, parallel channel after present process a powerful downtrend. It resolves after the worth breaks beneath its decrease trendline with an increase in buying and selling volumes.

Litecoin has been portray an analogous sample since early June 2022. Beforehand, 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 beneath the decrease trendline.

LTC/USD weekly value chart that includes bear flag breakdown setup. Supply: TradingView

As a rule, a bear flag breakdown transfer prompts the worth to fall by as a lot because the earlier downtrend’s size. Making use of 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 due to cooling inflation.

For instance, the Nasdaq-100 stock market index has risen approximately 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 optimistic at 0.35 on Jan. 27. Equally, the correlation between Litecoin and Bitcoin is now round 0.21.

Litecoin’s weekly correlation coefficient with Nasdaq-100 and Bitcoin. Supply: TradingView

However Mark Haefele, the chief funding officer at UBS International Wealth Administration — together with different many different analysts — has noted that the continued risk-on rally might be a “head pretend.” In easy phrases, the continued Litecoin rally, beneath the affect of its risk-on counterparts, might be short-lived. 

Impartial market analyst Capo of Crypto additionally agrees, noting:

“The way in which the upward motion is occurring, the way in which [higher-timeframe] resistances are being examined… it clearly appears manipulated, no actual demand. As soon as once more, the largest bull entice I’ve ever seen.”

Bullish situation for Litecoin

Nevertheless, not everyone seems to be bearish on danger property equivalent to Litecoin. Common market analyst Rekt Capital sees Litecoin rallying towards $160 within the coming weeks, citing a month-to-month chart setup as proven beneath.

LTC/USD month-to-month value chart. Supply: 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 may 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 may subsequently invalidate the bear flag setup, which occurs 54% of all time, in keeping with research by veteran investor Tom Bulkowski.

This text doesn’t comprise funding recommendation or suggestions. Each funding and buying and selling transfer includes danger, and readers ought to conduct their very own analysis when making a call.