Litecoin [LTC] bears demonstrated their dominance once again towards the end of last week, leading to more downside. However, LTC’s latest lows suggest that it is closer to the bottom than expected.
LTC achieved a new 2022 low on 14 June after bottoming out at $40.32. Its historic performance reveals that the latest price low acted as a structural level in 2020. LTC hovered near the same price level in the second half of 2020 before embarking on a rally in October of the same year. This means LTC’s latest drop placed it within the same price range as one of its most important support levels.
However, LTC bounced back slightly to $46.12 on 16 June after interacting with a descending support line. A closer analysis of its latest price action reveals that it is due to break out of its falling wedge pattern now that is within the price squeeze zone. Although the breakout might take place in any direction.
Litecoin’s RSI reveals that it became oversold at its recent low the slight recovery since then was characterized by some accumulation recorded by the money flow indicator. The DMI indicator also registered a sharp drop in selling pressure indicated by the directional shift in the -DI.
The +DI achieved a slight uptick, reflecting the slight accumulation, paving the way for some bullish performance. However, low volumes and uncertainty ensured that the bounceback was limited.
Making the bullish case for Litecoin
LTC’s oversold conditions highlight the first major sign that is due for a significant upside. Its pricing model on Glassnode further enforces the severely oversold observation. For example, its price is currently extended below its realized price of $107 by more than half. This is a sign that it is deeply oversold.
Source: Glassnode
Litecoin’s MVRV ratio had also extended its downside to 0.42 at press time. The ratio is considered oversold when it is below one, hence another confirmation that LTC is near the bottom.
LTC’s price and on-chain metrics lead to the same conclusion that it is indeed oversold and ready to hand over to the bulls. Nevertheless, the market remains at the mercy of investor sentiments which can shift abruptly. Such an outcome would lead bears to extend their dominance but not for long.
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