On the trading day of March 29th, Litecoin stood out as the top performer among the elite group of the top 20 cryptocurrencies, boasting a remarkable 12% gain within a swift 12-hour trading session.
A dive into on-chain analytics reveals the catalysts propelling the impressive surge in Litecoin’s valuation and sheds light on how market speculators are aligning their investments in LTC for the imminent days.
The Surge Spearheaded by Litecoin Miners Following the conclusion of its third halving event on August 2nd of the previous year, Litecoin’s valuation embarked on a downward trajectory. The ensuing sell-off, led by miners and key stakeholders post-halving, drove LTC to a two-year nadir of $57, merely a fortnight subsequent to the event.
Subsequently, Litecoin grappled to reclaim its stance above the $100 threshold until a bullish reversal in market sentiment emerged in March 2024.
With Litecoin’s valuation breaching the $105 mark on March 29th, the cryptocurrency has realized a commendable 33.5% uptick within the month. In-depth on-chain data analysis indicates that miners have played a crucial role in fueling this ongoing rally in LTC’s price.
Data from IntoTheBlock illustrates the dynamic shifts in the Litecoin holdings among acknowledged miners and mining collectives.
The aforementioned chart delineates a substantial accumulation of 150,000 LTC by miners in March, elevating their total holdings from just above 2 million LTC as of February 29th to 2.2 million LTC by the end of March.
At the current market rate, the newly amassed 150,000 LTC hold a valuation of approximately $16 million. This notable increment in miner reserves over a span of 30 days has invariably cast a bullish shadow on the market prices.
When miners veer into an accumulation phase, it constricts the influx of newly minted coins into the market, paving the way for bullish forces to predominate. It also mirrors the miners’ optimism regarding the near-future price trajectory of LTC, manifesting in their reluctance to liquidate holdings in anticipation of prospective gains.
Moreover, with the impending halving of Bitcoin mining rewards on April 20th, there’s rampant speculation about the potential migration of non-profitable Bitcoin miners to alternative Proof of Work (PoW) frameworks, including Litecoin.
Consequently, LTC miners might persist in bolstering their reserves, buoyed by the expectation that the forthcoming Bitcoin halving could amplify network complexities and, by extension, catalyze a favorable ripple effect on Litecoin’s market performance.
Despite a 33% Appreciation, Is LTC Still Undervalued? The surge in LTC’s price by 12% on March 29th elevates the cumulative March 2024 gains to 33%. However, juxtaposing this with the recent influx of capital into Litecoin’s derivatives market suggests that LTC might still be trading below its intrinsic value.
The open interest chart by Coinalayze below encapsulates the aggregate value of live derivatives contracts for Litecoin, offering a peek into the quantum of capital vested in derivatives, encompassing futures and options. This serves as a pivotal gauge of market sentiment and potential directional moves in price.
The chart reveals a jump in LTC’s open interest from $337 million to $481 million on March 29th, indicating a significant speculative capital injection of $144 million.
Crucially, this underscores that despite a 12% price appreciation in the last 12 hours, open interest has mushroomed by 42%.
An open interest surge outstripping price movement at the onset of a rally is indicative of the market’s bullish outlook, as evidenced by the willingness among participants to initiate new or expand existing positions.
Anticipating a Litecoin Price Surge to $150 Pre-Bitcoin Halving? Inferring from the dual phenomena of miners’ aggressive $16 million LTC accumulation and the $144 million fresh capital injection into the LTC derivatives arena, Litecoin’s valuation appears primed for an ascent towards the $150 benchmark preceding the Bitcoin Halving event on April 20th.
Nonetheless, a formidable resistance looms at the $130 demarcation. Data from IntoTheBlock highlights that approximately 571,150 addresses previously acquired 8.1 million LTC at an average price of $130.81.
Given their prolonged underwater status since July 2023, a considerable fraction might opt to liquidate their holdings upon breakeven. However, should the bullish fervor intensify, a decisive breach towards the $150 frontier seems plausible.
Conversely, a downturn below the $90 threshold could potentially empower the bears, albeit the fresh speculative capital influx renders this scenario less probable in the near term.
By Andrej Kovacevic
Updated on 23rd April 2024