Litecoin breaks $50 - what's next?

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Jan 12, 2020

A few days ago, I wrote about the crowd sentiment towards Bitcoin and how it’s turned increasingly bullish since the start of 2020. For better or worse, the tenuous correlation between the US-Iran conflict and BTC’s short-term price action recently sparked the highest amount of social chatter around Bitcoin since its November 30th bounceback - much of it positive:

Bitcoin's 9-month crowd sentiment (Source: Graphs by Santiment)

So far, the rise in bullish sentiment has mirrored the January rally for Bitcoin and most other big tokens. Since its interim low of $6921 recorded on January 3rd, the top coin gained 17.6% and appears poised to retest the $8200 resistance level at the time of writing.

As usual, Bitcoin’s rally is rarely a solitary event - over the last 7 days, the entire crypto market cap grew by just over 10%. Out of all the other top gainers, it appears that Litecoin has been particularly interesting to the speculative crowd in recent days.

And who can blame them - the 6th largest coin is up by a loud 27.5% since January 3rd, most of it gained while shadowing general market trends since the start of the year.

According to our data, LTC has been one of the biggest talking points on crypto social media over the weekend, with over 430 new mentions of ‘LTC’ and ‘Litecoin’ (2-month high) recorded by Sanbase:

Top 10 emerging words on crypto social media today (Source: Sanbase)
Mentions of 'LTC' or 'Litecoin' on crypto social media, last 3 monts (Source: Sanbase)

And for good reason - the coin has gained an impressive 11.5% in the last 48 hours, breaking another big, $50 psychological level for the first time in 40 days:

Litecoin's 1-month price action (Source: Sanbase)

Similar to BTC, the crowd has been slowly warming up to Litecoin since the start of the rally, though the overall sentiment remains slightly negative at the moment:

Litecoin's 4-month crowd sentiment (Source: Graphs by Santiment)

While the most recent sentiment block may seem like it’s plateauing, it’s actually inching closer and closer to positive values overall. The weighted LTC sentiment was at -0.19 on January 3rd, when LTC dropped down to $39.45; it’s already ‘up’ to -0.11 at the moment. Should the LTC rally continue over the coming days, we may see the bullish voices overtake the conversation relatively soon.

That said, a healthy dose of skepticism has already started creeping into LTC discussions. For some, the current trend brings flashbacks to another ill-fated LTC rally, which was followed by a major correction:

Let’s talk fundamentals. Despite the uptrend, LTC’s network activity has actually been in a slight downtrend over the last 30 days. The number of daily addresses interacting with the coin (DAA) had shrunk from a December high of 150,000 to just over 52k today:

Litecoin's Daily Active Addresses, 1 month (Source: Sanbase)

However, while the micro trends appear disconcerting, the current DAA levels are still in line with Litecoin’s long-term activity on the network:

Litecoin's Daily Active Addresses, 6 months (Source: Sanbase)

Plus, although there’s less active addresses overall, the on-chain transaction volume has actually been on the up and up both long term and in the past month. The most recent high in on-chain trx volume was recorded this Thursday, when a total of 6.12M Litecoin changed wallets:

Litecoin's on-chain Transaction Volume, 4 months (Source: Sanbase)

In terms of HODLer activity, there’s been an interesting spike in Token Age Consumed on January 8th - indicating that some previously idle coins have moved - which corresponded with a slight correction in price. The spike happened right as LTC was testing the $48 level for the first time since late November 2019, suggesting this was the line in the sand for some longterm investors:

Litecoin's Token Age Consumed, 3 months (Source: Sandata)

It’s also quite interesting to compare the MVRV ratio, or the average profit/loss margins of long-term and short-term LTC holders following this latest rally. At the moment, all long-term holder categories are still deeply in the red on their initial investment; 1y, 2y and 3y HODLers are all - on average - down over 30% compared to the price of LTC when they entered the market:

Litecoin's 1y, 2y and 3y MVRV ratios (Source: Sandata)

Compare this to new and new-ish LTC money, which must be loving the latest market developments. The MVRV ratio of Litecoins that moved in the last 7, 60 as well as 90 days are all returning positive values at the moment, with the 60-day holder category gaining (on average) the most on their initial investment: +7.4%

Litecoin's 7d, 60d and 90d MVRV ratios (Source: Sandata)

At the moment, likely the most concerning signal for a prolonged LTC rally is its current 70-day high social volume, which is the main reason the asset ranked #3 in our top trending words on crypto social media today:

Litecoin's 1-month social volume (Source: Sanbase)

These ‘hype peaks’ often precede or mirror impending price corrections, as whales look to dump on the FOMO crowd. But don’t take it from me: the red circles point to the times in the past 6 months that LTC appeared on our Emerging Trends list:

Litecoin's appearances on our Emerging Trends list, last 6 months (Source: Sanbase)

As is clear from the chart, most trending occasions historically correlated either with a local top or significant price volatility. It remains to be seen what the latest ‘red circle’ will bring to the price of LTC, though. If it holds ambitions of a prolonged rally - especially one not reliant on general market trends - Litecoin will need to pair it with strong on-chain activity - one robust enough to sustain its ongoing move upwards. Watch this space.

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Jan 12, 2020

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