Most crypto markets have been badly affected by the recent announcements by Elon Musk. After having tweeted a while ago that Tesla would accept Bitcoin as a form of payment, he backtracked later on and said that Tesla would no longer accept the crypto as a means of payment. Musk cited high energy use by Bitcoin miners, although he had known that already when he decided to accept Bitcoin earlier. His tweets had a profound impact on several markets including that of Litecoin, which tends to move in tandem with Bitcoin. With the first tweet, the Litecoin price spiked, with the second announcement, the price plummeted. Litecoin lost $50 as a result of the later tweet, as it was trading at around $380 and is now trading at around $300.
Technical Analysis of Litecoin
Litecoin has been moving in an uptrend since the beginning of the year. It started the year at around $132, and then climbed up to above $400 (at around $412). Then it consolidated for a while, before dropping to under $300 briefly as a result of Musk’s announcement. Then, the price climbed up again to around $325 then dropped again to $300, as seen on crypto exchanges and derivative trading apps like Easymarkets.
A clear upward trend line can be drawn from December 2020 to later bottoms in 2021. The price is still trading above that trend line, buoyed by both enthusiasm for cryptocurrency and US dollar weakness. Even with the recent drop, the price is still above the trend by a good margin, and this decline could only be a pullback in a larger upward trend.
Analysis of Different Timeframes
On the 4 hour time frame, the chart seems to reveal support at around $305 or $300. This support is keeping the price above it. A drop below this support could mean further decline. As the price has dropped below $300, then this means that the next target would be the 200 moving average (on the 4h time frame), followed by the rising trend line. A fall below that trend line would mean that the price has completely lost momentum, and that the preference should be to the downside.
On the weekly time frame, it becomes clear that Litecoin has recently surpassed the $375 peak reached back in December 2018. This is an important level, and the bigger picture shows that buyers still have the upper hand. If the most recent uptrend proves to be wave number 1 in a rising Elliot wave pattern, then we can expect a leg down (a continuation of the current decline) and then a leg up that can easily exceed the $400 levels. This leg up can take a few months, if not years, to form.
How to Trade Litecoin at This Point
On the higher timeframes, the uptrend still seems prevalent despite recent pullbacks. Long term traders would be wise to wait for good bullish signals to enter into long positions. Short term traders can take advantage of short-term declines, but there is no guarantee that the bearish move will continue. For the time being, the preference is still to the upside, albeit not advisable to enter into a position without a confirmation.