Litecoin has been overlooked in the previous bull cycle and has fallen into the background of the crypto market hype, overtaken by the release of new layer 1 platforms, scalability layer 2 solutions, and the NTF hype.
But, with its 4-year halving approaching in just two days, can this robust old Bitcoin fork gain back the investor’s interest?
Like Bitcoin, Litecoin undergoes a halving every four years with the next one scheduled for August 2. The current Litecoin block reward is 12.5 LTC. However, after the halving event, the block reward will be 6.25 LTC.
Halving usually serves as a buying catalyst. The supply emission rate is cut in half, which causes the price to search for a new equilibrium between the supply side (mining) and demand (investors and holders).
The price of LTC was on a decline from July 3, when it spiked to $115. The downtrend was minor and pulled back to $87.71 on July 24. Since then another uptrend started with the price recovering by 13.51%, measured to its highest point of $99.56 made on July 30.
Will this minor uptrend turn into a higher one and lead the price of Litecoin to a higher high above $115? Or is it another downtrend correction that will end before the price continues to move further to the downside?
Looking at the on-chain data and other relevant information, we have been examining the demand side in order to see if there is evidence to support the assumption that there will be buying pressure before the LTC halving.
First, let’s take a look at the top addresses (whales) and whether or not they have been stacking up on some Litecoin.
The distribution charts aren’t showing much activity from the July 2 spike across all major cohorts. Although we have been seeing an uptrend in general from the start of the year, the momentum started to diminish after mid-February.
Especially important for our analytical outlook is that in just short of a month, there wasn’t any increase in buying and won’t likely won’t be on-chain with LTC halving in only two days.
Transaction data also doesn’t show much out of the ordinary. Both the Transaction Volume and the Average Transfer Value are calm. We are seeing a slight increase in ATV but nothing even close to the spikes made on June 2.
The derivatives market is showing an increase in activity, and the Open Interest has risen since July 28, close to the levels of its highest point in July of $113.57M. It is currently sitting at around $94 million, which could indicate the activity from traders wanting to play into the hype. But these values and the momentum behind the OI increase also don’t support the assumption of the coming buying pressure.
In our previous LTC halving article, we have already outlined the likely outcome for this year’s halving.
In comparison to the previous LTC halving and the similarity with the price structure at the current one, the most likely outcome is a bearish one.
From June 18, 2022, the price of Litecoin was in recovery, but counting the wave structure, it appears to be corrective in nature. From mid-February, we have seen a triangle forming which could be the C wave from this assumed ABC correction.
As the price interacted with its resistance level on July 3 and started declining, it could have marketed the start of another descending move that will lead the price of Litecoin back inside its significant horizontal support zone of around $50.
Most likely, the price isn’t going to continue rising further than it already has, much like it didn’t in the previous halving and instead started declining before it. It only started to form an uptrend when the Bitcoin halving ended, which might be the case now.
With a minor uptrend now seen from July 24, it is still unclear whether it will turn into a higher degree uptrend that will lead the price of Litecoin above $115. This minor increase could very well be a corrective one in a downtrend.
On-chan data doesn’t suggest the increase in accumulation by large coin holders and no coming buying pressure. There is some activity on the derivatives side as Open Interest was on the rise; however, since OI just displayed the number of outstanding futures contracts, we can’t say for sure that it will turn into buying pressure.
Chart analysis also doesn’t support the case in which we can see some impulsive upside movement and instead suggests that the price is likely headed further to the downside.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.