Litecoin Shines During Recent Crypto Bounce

Crypto charts have been creeping back into the financial twittersphere lately. As most popular coins ala Ethereum, Bitcoin and Ripple are still cooling off from last year's bloodbath, one coin has been showing consistent outperformance. As Trader, Peter Brandt points out in his tweet below, “in the past three months $LTC has doubled in value relative to $BTC.”

Brandt charts the Litecoin ($LTC) / Bitcoin ($BTC) pair in his tweet and points out a 6-month inverted head and shoulders basing pattern. The base resolved higher last month and formed a bull flag which just broke to the upside this week. Evaluating a crypto-currency in terms of Bitcoin is like analyzing a currency vs the dollar or an equity sector relative to the S&P – it shows us the most favorable areas to be in within the crypto arena. If you are looking to put your money to work somewhere in this once beloved space, buying Litecoin is the way to do it.

The LTC/BTC pair bottomed during the same week as LTC/USD in the middle of December, the very same time as most other major coins. As Bitcoin and others continue to digest last year’s losses with mostly sideways action, Litecoin has been rapidly outperforming its crypto-peers for the past several months. As seen in the chart below, Litecoin has rebounded roughly 145% off its lows. That is more than double the performance of any other currency over the same period, and well outpacing Bitcoin which has only recovered a measly 23% (as of 3/8/19).

While 145% is nothing to sneeze at, I would be remiss not to put this move in the context of the big picture… Litecoin and the entire space have been in total free fall since the crypto-mania bubble burst just over a year ago. From peak-to-trough, LTC fell roughly 93% last year. Ethereum and Ripple also experienced losses of over 90% while Bitcoin was down over 80%.

So, despite rallying aggressively off its lows and being the clear leader in its space, LTC has still not retraced more than 10% of its drawdown. One might say that’s a good thing, leaving more room for upside. That’s fair, but I would be weary of a few things:

• The price is currently extended both in USD and BTC terms – when analyzing price action to determine an appropriate entry, always ask yourself where something came from (i.e., its recent performance).
• Bear in mind that the crypto-universe tends to move together – don’t expect LTC to rally too significantly if the other coins don't get going as well. The technicals show little to be excited about, as LTC/USD is the only one currently trading above its 200-day moving-average.
• While the LTC/BTC pair based for over 6-months, LTC/USD has not consolidated for as long. And from what I've been taught, the more severe the correction, the longer it takes to unwind.

CMT, Mark Newton also tweeted about Litecoin recently, and while acknowledging it “has steadily outperformed Bitcoin’s bounce since December,” he also expressed caution in allowing the basing process to play out...

While Mark believes there has been “meaningful progress” in the “bottoming attempt," he warns that “these moves sometimes take time.” He also points out that price is currently piercing the upper range of the weekly Bollinger band. Bollinger bands measure volatility and readings towards the upper and lower bands usually signal periods of larger than average price movements, resulting in current prices that are relatively high or low and due for mean reversion.

You might have heard the expression the “bigger the base, the higher in space.” What that really means is that good consolidation formations take time to build the buying pressure needed to drive a sustained move higher. So rather than take these cautionary words as a “stay away,” remain patient, monitor Litecoin's leadership and remember that a long consolidation can be healthy.