Litecoin (LTC) crossed the $ 400 mark and hit a new all-time high of $ 414 on Bitstamp on Monday.
The problem with buying Litecoin is that it has gotten too expensive in no time. The world’s 10th largest cryptocurrency by market capitalization is worth 215% more than it was earlier this year, rising from $ 124.42 to a new record high of $ 413.90.
The massive rally has beaten traditional markets in a year, and many independent analysts are now forecasting it to widen to $ 500.
Sensational returns in the Litecoin market followed a broad uptrend in the cryptocurrency market. Silver crypto’s top altcoin competitors, including Ether (ETH), XRP, Cardano (ADA), and many others, posted better profits, with Dogecoin (DOGE), a joke cryptocurrency, up more than 17,000% year over year at a time rose.
Jason Lau, Chief Operating Officer of OKCoin – a San Francisco-based crypto-services company – highlighted an inverse correlation between Litecoin and Dogecoin, noting that DOGE / USD exchange rates had risen over the period that the LTC / USD -Exchange took place by 12%, rates were 12% higher.
So … are people switching from $ DOGE (-12%) to $ LTC (+ 18%)? https://t.co/DQmWqXu5fp pic.twitter.com/l3GH2cSbic
– Jason Lau (@jasonklau) May 10, 2021
The Litecoin Dominance Index, a metric that measures Litecoin’s strength versus the rest of the cryptocurrency market, rose from 0.96% on Sunday to 1.11% on Monday. This also reflects a sentimental shift in Litecoin markets as other alternative cryptocurrency rallies show signs of cooling.
But Litecoin is now facing the same overvaluation risks that caused the price of Dogecoin to fall by up to 33% in the previous sessions. At the center of this bearish analogy is a classic momentum oscillator indicator known as the Relative Strength Index (RSI), which has historically predicted potential price reversals in world markets. It now tells the same story about Litecoin.
The LTC / USD daily chart is showing its RSI at an inflection level near 79.02. That’s 9 points above the overbought threshold that previously led to price corrections.
Typically, a short-term trend reversal in the Litecoin market – when the RSI hits its high – causes the price to test the 20-day exponential moving average (the green wave) as interim support. Meanwhile, a prolonged sell-off prompts traders to treat the 50-day simple moving average (the blue wave) as their primary downside target.
A potential pullback after the recent explosive move could therefore cause LTC / USD to rise to $ 252-310 based on current moving averages valuations.
Technical data aside, the macroeconomic catalysts continue to support the cryptocurrency markets as a whole.
A study conducted by Charles Schwab found that more than 51% of Millennial and Generation Z investors would be more likely to invest in cryptocurrencies than traditional stocks. Their interest in the emerging digital assets sector has increased amid fears of inflation and dollar devaluation, especially as central banks around the world are responding to the coronavirus pandemic by easing monetary policy.
For example, the US Federal Reserve has made it clear that it will continue its $ 120 billion monthly asset purchase program and keep policy rates near zero until at least 2023. This has lowered the opportunity cost of holding traditional safe havens like bonds and US dollars to regional investors.
The correlation between Bitcoin (BTC) and Litecoin is now close to 0.40, according to Crypto Watch.