Litecoin had experienced a sharp rise during yesterday’s trading session, along with the rest of the cryptocurrency market, increasing by as much as 9% as price action hit a high of $59.42 during the trading session. The cryptocurrency has since retraced slightly and is currently trading around the $55 handle bringing the 24-hour rolling price increase to just over +0.48%. This price hike comes after a week of negative growth as LTC has suffered a 11.26% price reduction over the past 7 trading days.
What is a Litecoin?
Litecoin was created in October 2011 by an ex-google employee called Charlie Lee. Lee intended to create a cryptocurrency that was “lighter” than Bitcoin which is where the name ‘Lite’ coin originates.
What makes Litecoin better than Bitcoin?
Litecoin uses a different hashing algorithm to Bitcoin which requires a significantly less amount of power to operate. It also can boast of having faster transaction speeds and lower fees relative to Bitcoin.
How much faster is Litecoin?
Currently, Bitcoin can only handle around 7 transactions per second (TPS) and this becomes troublesome when the demand for transactions increases. Usually, this will cause the blockchain to create a long backlog of transactions causing the transactions fee to increase. Litecoin, on the other hand, can currently handle around 56 TPS and is still scalable to achieve much more.
Litecoin can also process transactions at a faster period than Bitcoin can. Currently, Bitcoins block time is around 10 minutes per block. However, the Litecoin block time is significantly lower at 2.5 minutes per block.
What about the Lightning Network?
To add further to the case as to why Litecoin is ‘better’ than Bitcoin we need to only look at the technology of the blockchain. Litecoin currently has SegWit and the Lightning Network integrated into its blockchain. This allows for transactions to take up less space within the block (SegWit) and for small transactions to be taken off-chain (Lightning Network) so the main chain does not become crowded with transactions.
Furthermore, Litecoin has already participated in Atomic Swap transactions. This a process where users can transfer one cryptocurrency for another cryptocurrency through the Lightning Network without the need to participate in a centralised exchange.
Where is Litecoin ranked?
Currently, Litecoin is sitting at 7th position in terms of overall market cap across the entire industry. It has a total market cap value of $3.25 billion. The 64 month old coin has significant losses to regain as price action has dropped by 37% over the past 30 trading days and by 57% over the past 90 trading days.
Let us continue to analyse price action for Litecoin over the long term.
LTC/USD – LONG TERM – DAILY CHART
The bull run
Analysing the market from the long term perspective above, we can see that Litecoin had experienced a significant price increase during the end of 2017 when price action started from a low of $49 on November 2 2017 and extended to an all time high of $370 on December 19 2017. This was a price increase totalling over 700% from low to high.
What happened after?
After placing this all time high, we can see that price action rapidly declined. It originally found support at the .618 Fibonacci Retracement level, priced at $172.28 in January 2018. This Fibonacci Retracement is measured from the entire bullish run outlined above.
Price action continued to fall throughout February to find support at the .786 Fibonacci Retracement level priced at $118.37. From here we can see that the market rebounded slightly to trade back above the $200 handle.
The market had managed to stay above the .786 Fibonacci Retracement support level until June began to trade. Here price action fell further lower, below the .886 Fibonacci Retracement priced at $86.29 to find support at a downside 1.272 Fibonacci Extension level priced at $73. We can see that price action remained range bound between these two levels for all of July until August started to trade.
What happened in August
During the overall market bloodbath seen throughout August, we can see price action fell below the range established in July and dropped substantially until support was found recently at $49. As price action approached this level, this marked a 100% Fibonacci Retracement of the overall bullish run previously aforementioned.
What about this dotted triangle?
Throughout the course of the trading year, we can see that price action has been confined within the boundaries of the steep declining wedge formation. Each time the market tried to break above the wedge, price action fell aggressively. On the flip side, each time that the market tried to break below the wedge, price action was also rejected and rebounded.
We can see that the support received from the $49 handle was bolstered by the lower boundary of the descending wedge pattern.
Let us continue to analyse price action a little closer over the short term to highlight any potential support and resistance zones.
LTC/USD – SHORT TERM – DAILY CHART
Some more information on August trading
Analysing the market from the shorter time horizon, we can see the steep decline experienced throughout August, as price action started the month at a high of $78.97 and dropped all the way to the low experienced recently at $49. So far, this has been a price drop of around 37% from high to low.
We can see that the support level experienced during July, priced at $73, was reinforced by a shorter termed downside 1.272 Fibonacci Extension priced in the same area. However, the support would still not prove strong enough for the precipitous decline that August brought.
Where are we trading now?
After bouncing at the $49 handle, we can see that price action has found support at the short term downside 1.414 Fibonacci Extension level priced at $53.69. This support level also corresponds with support received by the lower boundary of the descending wedge formation outlined above.
Where can we go from here?
If the bullish momentum continues to gather steam at the $53.69 support level and pushes the market higher, we expect immediate resistance to be located at the previous downside 1.272 Fibonacci Extension level priced at $73.85. This level provided significant support throughout July and therefore is expected to provide a similar level of resistance as the market re-approaches the level.
Further resistance expected above $73.85 is expected at the long term .886 Fibonacci Retracement level priced at $86.29.
What if the bears regain control?
If the bearish pressure reenters the market and pushes price action below the highlighted support at $53.69, we expect immediate support to be received at the lower boundary of the descending wedge followed by the $49 handle.
If the market does manage to break below the wedge, we expect further support to be located at a further downside 1.272 Fibonacci Extension level (drawn in turquoise) priced at $43.79 followed by the psychological round number handle at $40.
What are the technical indicators reading?
Currently, the technical indicators are heavily favouring the bearish scenario. The RSI has been trading in extreme oversold conditions for the majority of August. However, RSI has recently managed to break out of oversold conditions as it makes its way back to the 50 handle. This could be a signal that the previous bearish momentum is showing signs of fading. A sustained break of the RSI above the 50 handle would indicate that the bulls are beginning to regain control.
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