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


Litecoin (LTC) has rebounded by 130% to nearly $100 after bottoming out close to $40.50 in June 2022. The first causes embody broadly bettering risk-on sentiment and euphoria round Litecoin’s upcoming halving in August 2023.

However, technicals suggest that LTC may wipe out most of these gains in the coming months.

LTC price paints giant bear flag 

Litecoin stands to pare its gains mainly due to a giant bear flag on the weekly chart.

A “bear flag” is a bearish continuation pattern that occurs when the price consolidates inside an ascending, parallel channel after undergoing a strong downtrend. It resolves after the price breaks below its lower trendline with a rise in trading volumes.

Litecoin has been painting a similar pattern since early June 2022. Previously, the LTC/USD pair had undergone a 70% price correction from $130 to $40.50. Thus, from the technical perspective, it would resume its downtrend course if its price breaks below the lower trendline.

LTC/USD weekly price chart featuring bear flag breakdown setup. Source: TradingView

As a rule, a bear flag breakdown move prompts the price to fall by as much as the previous downtrend’s length. Applying the same setup to Litecoin brings its bear flag downside target to nearly $30.50, or 65% lower than the current LTC price.

Litecoin price “head fake”?

As said earlier, Litecoin‘s price recovery has primarily occurred in line with similar moves across 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 more than 50% since its November 2022’s low of around $15,500.

The weekly correlation coefficient between Litecoin and the Nasdaq-100 has been mostly positive at 0.35 on Jan. 27. Similarly, the correlation between Litecoin and Bitcoin is now around 0.21.

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

But Mark Haefele, the chief investment officer at UBS Global Wealth Management — along with other many other analysts — has noted that the ongoing risk-on rally could be a “head fake.” In simple words, the ongoing Litecoin rally, under the influence of its risk-on counterparts, could be short-lived. 

Independent market analyst Capo of Crypto also 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 reminiscent of Litecoin. Fashionable 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 exhibits 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 due to this fact invalidate the bear flag setup, which occurs 54% of all time, in line with analysis by veteran investor Tom Bulkowski.

This text doesn’t include 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.