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Litecoin price hits $400 all-time high, but LTC rally at risk of overheating

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Litecoin (LTC) has damaged the $400 mark, reaching a brand new all-time excessive price of $414 on Bitstamp on Monday. 

The issue with shopping for Litecoin is that it has change into too costly in a little or no interval. The world’s Tenth-largest cryptocurrency by market capitalization is price 215% greater than it was at the start of this yr, hovering from $124.42 to a brand new report excessive of $413.90.

Its huge rally has overwhelmed conventional markets on a year-to-date timeframe, with many unbiased analysts now predicting the transfer to increase towards $500.

Rotational buying and selling

Eye-popping returns within the Litecoin market got here on the heels of a broad upside transfer within the cryptocurrency market. The silver crypto’s high altcoin rivals, together with Ether (ETH), XRP, Cardano (ADA) and lots of others, posted higher income, with Dogecoin (DOGE), a joke cryptocurrency, rising by greater than 17,000% YTD at one level.

Jason Lau, chief working officer of OKCoin — a San Francisco-based crypto service enterprise — highlighted a brewing inverse correlation between Litecoin and Dogecoin, noting that the DOGE/USD trade charges dropped by 12% within the interval that noticed the LTC/USD trade charges popping increased by 12%.

So… are folks rotating from$DOGE (-12%) into $LTC (+18%)?? https://t.co/DQmWqXu5fp pic.twitter.com/l3GH2cSbic

— Jason Lau (@jasonklau) Could 10, 2021

In the meantime, the Litecoin Dominance Index, a metric that measures Litecoin’s energy in opposition to the remaining of the cryptocurrency market, elevated from 0.96% on Sunday to as excessive as 1.11% on Monday. That additional displays a sentimental shift to the Litecoin markets as different various cryptocurrency rallies present indicators of cooling off.

Litecoin Dominance Index recovers amid rotational buying and selling. Supply: LTC.D on TradingView.com

But Litecoin is now grappling with the identical overvaluation dangers that induced Dogecoin’s price to crash by as a lot as 33% within the earlier periods. On the core of this bearish analogy lies a basic momentum oscillator indicator, dubbed because the Relative Energy Index (RSI), that has traditionally predicted potential price reversals in international markets. It now tells the identical story about Litecoin.

Litecoin overbought?

The LTC/USD every day chart reveals its RSI at an inflection degree close to 79.02. That’s 9 factors above the overbought threshold, which has earlier led to price corrections. 

Litecoin price’s response to increased RSI ranges in current historical past. Supply: LTCUSD on TradingView.com

Usually, a short-term pattern reversal within the Litecoin market — when its RSI tops out — leads the price to check the 20-day exponential transferring common (the inexperienced wave) as interim assist. In the meantime, an prolonged sell-off prompts merchants to deal with the 50-day easy transferring common (the blue wave) performing as the first draw back goal.

Due to this fact, a possible pullback following the current explosive transfer dangers sending LTC/USD to $252–$310 primarily based on present transferring common valuations.

Macroeconomic catalysts

Away from technicals, the macroeconomic catalysts proceed to assist cryptocurrency markets on the entire.

A examine carried out by Charles Schwab confirmed that greater than 51% of Millennials and Era Z traders would extra probably put money into cryptocurrencies than conventional shares. Their pursuits within the rising digital property sector have surged within the wake of inflation and greenback devaluation fears, particularly because the central banks all over the world reply to the coronavirus pandemic with easing financial insurance policies.

The USA Federal Reserve, for example, has clarified that it could proceed its $120-billion month-to-month asset buy program whereas sustaining benchmark charges close to zero at least till 2023. That has lowered the chance prices of holding conventional secure havens like bonds and {dollars} amongst regional traders.

In the meantime, the correlation between Bitcoin (BTC) and Litecoin stands close to 0.40, in keeping with knowledge collected from Crypto Watch.

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