Among large-cap cryptoassets, only binance coin has performed better, and litecoin’s year-to-date rally leaves the bitcoin price’s 40 percent advance in the dust. However, one team of crypto analysts says the sixth-largest cryptocurrency looks poised for a sell-off.
Writing in a note to clients on Wednesday, crypto brokerage BitOoda said that a downward wedge has begun to form on the litecoin chart, suggesting that the cryptocurrency could be on the verge of a short-term breakdown. That sell-off would likely cause the litecoin price – which currently holds near $80 – to crash below its near-term support line at $75.
BitOoda EVP Brian Donovan wrote:
“[W]e have seen a downward wedge forming over the last week or so. We look for potential breakdown of that $75 near-term support.”
But while Donovan’s analysis suggests that traders might be wise to take some short-term profits, a breakdown would not necessarily be a sign of long-term weakness in the cryptocurrency. Rather, it would be a “healthy” retracement given that the litecoin price has already surged more than 350 percent from its bear market low at $22.
“LTC has rallied from the lows of last December from ~$22 roughly 350%. A short-term retracement would not at all be unlikely NOR would it be a bad sign for the token. Healthy pullbacks can and should occur in an asset that rallies this hard, this fast.”
Even so, not everyone is convinced that litecoin’s support level test will result in a breakdown.
Writing on Twitter, The Rhythm Trader set forth a more bullish scenario, arguing that if more volume rushes in to defend that support level – which until recently was a key resistance line – the litecoin price could quickly vault into triple-digit territory.
“If $LTC shows a little volume here, this could get really interesting with a break of $100 quick if this support holds.”