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

Litecoin (LTC) has damaged the $400 mark, reaching a brand new all-time excessive worth 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 value 215% greater than it was at first of this 12 months, hovering from $124.42 to a brand new report excessive of $413.90.

Its huge rally has crushed conventional markets on a year-to-date timeframe, with many impartial 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 plenty 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 alternate charges dropped by 12% within the interval that noticed the LTC/USD alternate charges popping greater by 12%.

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

— Jason Lau (@jasonklau) May 10, 2021

In the meantime, the Litecoin Dominance Index, a metric that measures Litecoin’s power towards the remainder 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 different cryptocurrency rallies present indicators of cooling off.

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

Litecoin overbought?

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

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

Subsequently, a possible pullback following the latest explosive transfer dangers sending LTC/USD to $252–$310 based mostly on present transferring common valuations.

Macroeconomic catalysts

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

A study performed by Charles Schwab confirmed that greater than 51% of Millennials and Technology Z traders would extra doubtless 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 US Federal Reserve, as an illustration, has clarified that it could proceed its $120-billion month-to-month asset buy program whereas maintaining benchmark charges close to zero no less than till 2023. That has diminished 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 accordance with data collected from Cryptowatch.