The litecoin-U.S. dollar (LTC/USD) exchange rate is again trading below $50, just three weeks after setting a new all-time high just below $100.
While the sell-off is in line with the broader market weakness, it may be alarming given the recent losses and the lack of signals for a bullish reversal. As of writing, the cryptocurrency (known as "silver to bitcoin's gold") was trading at around $45.
According to data from CoinMarketCap, litecoin has shed 11 percent in the last 24 hours. On a weekly basis, litecoin's price is down 14 percent, and, for the month, it's down 1 percent.
Perhaps most notable, however, is that the cryptocurrency has lost more than 50 percent of the gains its achieved during its tech-influenced revival earlier this year, during which it climbed from $3.27 (September 2016 low) to $100 (September 2017 high).
Adding uncertainty is that litecoin-specific news has been upbeat.
Earlier this week, Coinbase has announced the inclusion of litecoin, as well as ether, in its "vault" service – adding an extra layer of security over the standard Coinbase wallet. The development, however, seems to have received little attention, as evident from the 11 percent drop in litecoin prices yesterday.
Price action analysis suggests the pain period is not over yet, and the gravity pull could gather speed over the weekend.
200 SMA could be put to the test
Litecoin's 200 simple moving average (SMA) is located at $33.52 – interestingly, almost coinciding with last Friday's low of $33.56
If the price keeps dropping, the 61.8 percent Fibonacci retracement level of $40.01 could offer support.
It's worth noting that the sharp recovery from last Friday's low of $33.56 ran out of steam around the downward sloping 50-SMA, where prices have now formed a lower high.
The relative strength index (RSI) remains bearish. The rally from $33.56 lacked substance/buying pressure, as suggested by the decline in the average true range (ATR) – a volatility indicator that reveals the degree of interest or disinterest in a move.
A bearish reversal with an increase in ATR shows strong selling pressure. The ATR is showing signs of life, which means the sell-off in litecoin could gather pace.
The price chart also shows a bearish crossover (short-term moving average cuts long-term moving average from above) between 50-SMA and 200-SMA.
- Litecoin is likely to test 200-SMA support of $33.52 in the short-run.
- Upside is likely to be capped around the downward sloping four-hour 50-SMA.
- Only a break above the trend line sloping downwards from the record high and September 8 high would signal bearish-to-bullish trend change.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has ownership stake in Coinbase.
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