The litecoin price [LTC to US dollar exchange rate] surged to an all-time high of over $90 on September 1, taking its year-to-date gains above 2,000 percent.
But while the cryptocurrency was riding high on technological advances, China’s abrupt ICO ban delivered a blow to momentum. Ethereum, bitcoin, bitcoin cash and so on tanked, and litecoin was no exception, dropping more than 15% on Monday to a 5-day low of $64.
Since then, the cryptocurrency seems to have regained poise. Tuesday’s bullish inside day candle has been followed by a rise to $80 levels today.
The development is notable as an inside day candlestick pattern occurs when a security trades within the high and low range of the previous day. It works as a bullish signal if the price action on the following day is positive. On the contrary, a negative price action on the following day is read as a bearish signal.
As per CoinMarketCap, litecoin has seen the third biggest gains among the top 10 cryptocurrencies over the last 24 hours, ranking only below bitcoin cash [up 15.37 percent] and IOTA [up 13.72 percent]. LTC/USD traded at $78 at press time.
Week-on-week, the currency is trading largely unchanged. On a month-on-month basis, LTC is up 75.46%.
What's behind the rally?
Litecoin's rally is best seen not as an isolated event, but part of an increased institutional interest in the cryptocurrencies, triggered by a major rally in bitcoin this year. As it remains best known as the "silver to bitcoin’s gold," the focus of the team behind litecoin has been to promote it as a payment method, especially as bitcoin continues to underperform in this area.
As LTC creator Charlie Lee said recently, "Litecoin will provide a niche where it will be more used for payment, whereas bitcoin will be more used for storing."
Yet, while it has a smaller network, with fewer merchants and miners, it's also showing signs its technology is advancing more quickly.
Litecoin was the first major currency to activate a code upgrade called SegWit on May 10, moreover, SegWit activation opened doors for the Lightning Network on litecoin, which would allow for faster and cheaper transactions.
On September 1, Litecoin Foundation tweeted that the first Lightning Network-based litecoin transaction was successful.
Will the rally continue?
In the short-run, everything depends on what bitcoin does next. In the long run, as with all cryptocurrencies, the fate of litecoin depends on how efficiently it creates a niche for itself.
Many are also of the opinion that litecoin acts as a bitcoin-hedge. However, a crash in bitcoin will be a net negative for cryptocurrencies as bitcoin is the gold standard in the nascent market.
Looking ahead, however, there are few signs of stress on technical charts.
- The sell-off from the record highs above $90 levels was pretty much in line with the overbought 14-day RSI in which price moved to the upside.
- Sellers ran out of steam near the support offered by the 61.8% Fibonacci Retracement level of the rally from the August 8 low to September 1 high.
- As discussed earlier, yesterday's bullish inside day candle and a positive action today is bullish. Thus, one can expect litecoin to revisit $90 levels.
- Trend reversal [bullish to bearish] would be confirmed only after a break below the September 4 low of $64.00.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
Litecoin image via Shutterstock