Litecoin (LTC) has experienced a growth of over 50% in the last month, reflecting the general increase in altcoin values. Despite this upturn, there are certain analysts who suggest that Litecoin’s future might not be as promising as its recent surge may suggest.
An analysis by Ali Martinez highlighted that currently, LTC is trading at levels similar to those seen in 2017. Furthermore, it is argued that the lack of strong underlying factors could hamper any substantial long-term progress for Litecoin.
While short-term gains may be possible, the likelihood of Litecoin breaking out of its current consolidation phase seems limited.
Strong Profitability for Litecoin Wallets in 2021
Contrary to the pessimistic notion, the recent price surge of Litecoin has resulted in a significant rise in wallet profitability, reaching its highest point since 2021. Recent data from IntoTheBlock indicates that a notable 78% of LTC holders, amounting to around 6.33 million addresses, are now in a profitable state.
In contrast, the proportion of wallets in a loss position has fallen from 46% to just 16% within a single month.
This increase in wallet profitability serves to boost market confidence and may pave the way for a more optimistic outlook for Litecoin.
Nonetheless, some early investors and those who joined during the recent rally could opt to cash in their profits, potentially weakening the current trend.
What Does a High Address Count Indicate for Litecoin?
The active address count for Litecoin currently stands at 364,000, surpassing that of many other altcoins. For instance, Cardano (ADA), with a market cap four times larger, boasts only around 41,000 active addresses.
However, a broader view reveals a declining trend in Litecoin’s address count over the long term, notably dropping from over a million active addresses at the beginning of the year.
This downward trend may imply a reduction in Litecoin’s utility throughout the year, a factor that could potentially exert negative pressure on its price.
Concerns Arise Amid Bearish Signals for Litecoin’s Price
Currently trading at $123, Litecoin has registered a 1.57% gain in the last 24 hours. However, an inverse cup and handle pattern visible on its four-hour chart suggests a possible impending downtrend for this altcoin.
If Litecoin succumbs to downward pressure and its price reverses, traders are advised to monitor the crucial neckline support at $100.65, as breaching this level could trigger further losses.
The Chaikin Money Flow (CMF) signal hints at diminishing buying pressure given its descent towards the zero mark. A transition into negative territory might signify an increase in selling activity, leading Litecoin into a bearish phase.
Although the Moving Average Convergence Divergence (MACD) histogram signals weak buying pressure, the positive positioning of the MACD line on lower timeframes suggests a mildly bullish momentum.
Decline in Litecoin’s Open Interest
Recent data from Coinglass reveals a decline in speculative interest surrounding Litecoin, following a peak earlier this month when Open Interest (OI) surged to $706 million.
The OI has since reduced to $531 million, indicating that some traders have closed their positions.
A drop in Open Interest often indicates a bearish sentiment, as fewer participants engage in the market, adopting a cautious and uncertain stance.