Well well well, at this point, everyone is probably losing patience with Litecoin. But selling now might end up being a huge mistake, even though I am also tempted to do so. I even feel like there are some other coins that could provide better opportunities for the final leg of this bull market. Nevertheless, I'm holding this as a trading position, with the sole intention of selling to increase my other positions (Ethereum, in particular). I have other coins for "moonshot" gains. I do think it's important to watch Litecoin, as a canary in the coal mine for the performance of other altcoins, and particularly Bitcoin dominance. Dominance has still not broken below the 60% level. If it does, I think LTC/BTC will do well.
This chart shows the Litecoin/Bitcoin ratio for the last 7 years. We can clearly see that there are short periods of impressive ratio improvement, often followed by very long periods of decline. The weekly MACD is losing momentum to the sell side, and is on big upside move away from confirming a bullish cycle. The yellow vertical lines mark Litecoin halvings. The halving is the moment when the block reward for mining decreases by half. Therefore, it requires more energy to produce the same amount of Litecoin. It becomes more scarce as a result. This is the same principle behind Bitcoin's price appreciation over time. A major difference between the two cryptocurrencies is actually that Litecoin is MORE expensive to produce, due to the Scrypt algorithm, which is more complex than the algorithm Bitcoin uses. Although transactions are comparatively cheap, it is more expensive to produce. This does not make it particularly attractive for me, but I decided to jump at this trading opportunity.
Despite its drawbacks, Litecoin does offer some advantages over other top cryptocurrencies, and there are reasons to see it as undervalued within the market: 1) It has the Bitcoin brand, and staying power. 2) Strong economics, with a supply of only 84 million coins, and halvings built into its design. 3) There will be a privacy layer implemented this year. The code has just been released. Can be a short-term catalyst. 4) Compared with Bitcoin and Ethereum, it's cheaper and faster to send. 5) Demand clearly exists for Litecoin at the institutional level. For the past few weeks, Grayscale has been selling some Bitcoin and Ethereum in favor of more Litecoin.
From a market cycle perspective, I'm waiting to see if Litecoin moves up here on the ratio, just as it did 4 years ago in March. What seems different here is that Bitcoin appears to be further along in its own cycle than it was in March, 2017. This has pulled Litecoin price up, though the ratio continues to stagnate and buckle under what seems to be unrelenting sell pressure. In 2017, Bitcoin had only just started breaking its previous all-time-high, and as LTC declined on the ratio, it didn't move up at all in USD value. So, Litecoin is actually in a better position against the dollar than it was 18 months after its 2015 halving. Here, Bitcoin are roughly 3x its previous ATH already. This has helped boost LTC price. As marked by the blue lines on my chart, the March 18 months after the previous halving is when Litecoin began to outperform Bitcoin.
Here's the LTC/USD chart from the previous cycle, showing the stagnation until March:
Something else to watch: The on-balance volume is declining as the ratio declines. This tells me the selling momentum is real on this pair. People are letting go of their Litecoin. However, there is accumulation occurring on the USD pair. To me this means that LTC is in a long term decline against Bitcoin, and that it may not ever reach a new high on the ratio. This is one of the reasons I'm looking at this as a trade, and not a long term investment. If the ratio goes up soon, it will need to be on the back of massive whale activity. This is needed to overcome the strong selling pressure.
If you look at my previous analysis, I am also looking at LTC's performance against Ethereum.
My trade was to add to my LTC position with ETH at the green X. I am waiting to exit once Litecoin confirms a new cycle. We'll see what happens! History might not repeat, but as I listed above, there are several reasons to be bullish. I plan to take profit in stages.
This is not financial advice! Anything I write on here should be taken purely as documentation of my own experience in this market. This is meant for speculation, education, and entertainment only.
-Victor Cobra
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***when looking at the MACD - ONE big upside move from confirming a bullish cycle. Not ON. My current keyboard sucks, and the E key is sticky, but thankfully I'll be getting a new laptop in a couple of weeks. I should be able to do some live streaming as well.
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Still no sign of the sell pressure letting up. Buyers can step in at any point, but they might wait until a test of the smaller wedge resistance turned support. A lot of people might also be expecting a final flush to the 0.003 level. Let's see if it gets there.
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Continuing to slide down towards the previous wedge resistance. Let's see if we get a reaction soon. Still holding the position, though it looks very weak. Looks can be deceiving, particularly in crypto. Interested to see what happens over the next week.
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Something's brewing here. Often when I see declining volume in a downtrend followed by a green candle on larger volume, it indicates seller exhaustion.
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Is this finally it?
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A wild bounce appeared. Let's see if it can finally break the downtrend.
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Of course, rejected at the downtrend. But if the weekly closes here, that gives the opportunity for LTC to break out this coming week and head to the next resistance at 0.0067.
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Wow, look at that! Coiling right up against the long term downtrend. This is the most bullish LTC/BTC has looked in a while. Buyers haven't been quite as scared off this time by the resistance. Let's see if it blows! Hopefully Bitcoin doesn't ruin the show.
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Looks like we had a successful breakout. As long as Bitcoin can hold up here and maintain a bullish trend (even if it continues to consolidate near the 100 day MA), Litecoin should be good for continuation on the ratio. What I don't want to see is Bitcoin break harshly below the 100 day MA (currently slightly below 50k).
Another very well thought out and sophisticated analysis. Losing patience but staying strong with my thesis of 0.02 LTC/BTC pair this year!
VictorCobra
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@BCBackerBacker, Thanks! Yeah we'll see. The next couple of weeks should be telling. Not ruling out a brief move to 0.003. There is a huge amount of sell pressure and buyers don't have the strength yet.
-Victor Cobra
ezpi
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Really great writeup.
I have some very fundamental checkboxes that I require every project/coin/chain to meet in order to invest.
Obviously bitcoin is the kingcoin so I hold some but litecoin is far superior to bitcoin. It was invented specifically to solve many of bitcoins problems - and it does so.
I use litecoin to move value between exchanges, wallets, etc. as the fee to move is super low, and tx speed is much faster. Paying a few cents to move 10k or 20k here or there is super easy and LTC is also accepted pretty much anywhere BTC is - they are the same chain.
For those who dont know, LTC was a fork of BTC that aimed at solving BTC's huge block time, power consumption, fees, and speed. It did so by at minimum 4x of BTC in all areas.
I always hold LTC regardless of its price action because its the easiest/cheapest way to move value between exchanges, wallets, my crypto.com visa card, etc etc etc....
If the world understood the technology - LTC would replace BTC completely.
I believe that will actually happen to some degree, as widespread knowledge is only a matter of time....and the problems that BTC is creating (energy, processing time, etc) are only growing exponentially as adoption occurs.
Very interesting catch that you found grayscale swapping BTC and ETH to LTC.
VictorCobra
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@ezpi, Thanks for your extensive comment! I mostly agree with you. I've always used Litecoin to transfer between exchanges. I would rather use XLM, but it doesn't have nearly as much volume or liquidity. I hold both. Correct me if I'm wrong though - if Litecoin had Bitcoin's market cap, it would require more energy to mine, since the algorithm requires more computing power. I'm not an engineer, so I'm definitely not an expert on this subject. I'm more of the analyst/philosopher type.
-Victor Cobra
Remdog420
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@VictorCobra, if we priced LTC at par with BTC relative to average daily volumes while taking into account outstanding coins in circulation, we would get about $1,300 for LTC and that does not take into account the fact that LTC is a 1/100th the cost while improving the transaction speeds. Bullish LTC, Bullish ZEC, Bullish DASH, Bullish XMR, all at low relative to the /BTC pair, all have been bottoming at these lows for the past 3 months, with most having put in double to triple bottoms. Giving the liquidity, daily volumes and economic benefits of low transaction fees, only a matter of time before people start to spill over into coins that actually allow you to use it for the intended purpose. ETH, to execute a contract is $20-40 to enable an address in COMP so I can deposit my BAT, ZRX, and yield some interest. Giving I only have 4k BAT at 3% that's $120 BAT/COMP paid out while it cost $ to enable and to transfer which means $40-80 in fees. The fee's have locked me out from using these protocols. once available on TEZ, ETC, ALGO, TRX, be a cent to execute such contract and we can very quickly see the value bridge to these secondary Platforms all of which are being interconnected via an ATOM, Oracle's etc.
ezpi
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@Remdog420, ALGO would rip all those chains apart on speed and txn fees. been holding AGLO a long time. its another completely superior technology.
just a matter of time....
@VictorCobra -- LTC doesnt really take much more to mine than BTC, but you are sortof right. yes if they were at same market cap and volume, LTC would.
that is because LTC is more deflationary given its increase in total circulation; and it added security layer. (comparing to BTC)
but thats what you want in a currency-coin isnt it?
BTC cant scale to function as currency. its already too slow at 1T market cap.
LTC can scale to 20T market cap but then it wont be able to handle it past that either, but at least until then maybe it will be the crypto currency.
BTC is a SOV. not a currency.
and ya remdog....ETH fees are crazy...cant use it at all unless youre doing minimum 10k value txns.
DOT or ADA or ETH2 need to fix this because ETH is currently total broken. its ridiculous.
ezpi
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@Remdog420, BTW just get celsius and throw BAT etc in there.
not great yield, but....BAT is another coin that is going to totally disrupt the entire online media marketing industry and its just catching on. thats a multi-T industry and BAT has no competition.
everything i invest in must have utility. the meme coins will die next cycle like they always do. chains/coins with utility that solve a problem will continue to boom.
its our golden era! ride!
bobbycrypto05
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Awesome post mate. Where do you think its headed now after that nice little pump yesterday?
VictorCobra
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@AusCrypto5, LTC will probably have a hard time making a substantial new USD high until it breaks the downtrend on the BTC pair. But I can see it going towards 225ish in the short term, as long as Bitcoin holds up. I'm just waiting very patiently for a Litecoin cycle to begin. My feeling is it should begin within the next week or two. The last week of March, 2017 is when it happened last time, I believe. Bitcoin dominance could close the monthly looking pretty bearish, so might not get a substantial move until April 1st. If nothing happens on the ratio within the next couple weeks....I'll be pretty concerned. Especially if DXY (dollar index) continues up.