Recent Challenges in the Cryptocurrency Market
The last several months have been tough for the cryptocurrency market. Cryptocurrencies have faced substantial selling pressure due to hawkish signals from central banks and ongoing uncertainty caused by the Ukraine crisis. Many central bank officials have acknowledged that high inflation necessitates restrictive interest rates, with an openness to being even more aggressive if inflation persists.
While these rate hikes are meant to control inflation and stabilize the economy, investors fear that overly aggressive interest rate hikes could push the economy into a recession. Riskier assets, such as stocks and cryptocurrencies, tend to struggle under such conditions, and it’s worth noting that these risk assets have been significantly affected by the US central bank’s tightening monetary policy.
The Managing Director of the International Monetary Fund, Kristalina Georgieva, stated that the US central bank is on track to bring inflation down, and investors hope the Fed will adopt a more accommodative approach at its next policy meeting. Matt Weller, global head of market research at Forex.com, commented:
“Like many risk assets, the crypto market is benefiting from investors lowering their expectations for the Fed’s peak interest rate this cycle to around 3.75% by the end of the year.”
Jeong Seok-moon, the head of the South Korean exchange Korbit, believes that the crypto winter may end before 2022 concludes, but he also sees the US Federal Reserve’s fight against high inflation continuing to impact crypto markets for the time being.
Litecoin’s Technical Overview
After peaking above $130 in March 2022, Litecoin (LTC) has seen a decline of over 60%. The price has currently stabilized above the $50 support level, but a fall below this threshold could signal that Litecoin may test the $40 support level next.
The chart below illustrates the trendline, and as long as Litecoin’s price remains beneath this trendline, we cannot talk about a trend reversal, keeping the price in the SELL-ZONE.
Key Support & Resistance Levels for Litecoin
In the chart from September 2021, I have marked the key support and resistance levels that traders can use to predict potential price movements. The more frequently the price tests a support or resistance level without breaking it, the stronger that level becomes. When the price moves past a resistance level, it could turn into support. Litecoin is still in the “bearish phase,” but if the price climbs above $80, it could indicate a trend reversal, with the next target potentially around $100. The current support level stands at $55, and breaking this would trigger a “SELL” signal, with the next support level at $50. A drop below $50, which is a strong support level, could lead to a target around $40.
Factors Supporting a Price Increase for Litecoin
Litecoin has gained more than 10% since the beginning of July, rising from $50 to a high of $61.77. This sharp rise saw Litecoin testing the $61 level multiple times but failed to maintain that level.
Various surveys indicate that institutional investors remain bearish on Litecoin, and it’s worth noting that this negative sentiment isn’t limited to institutional investors. The spot markets are also feeling the pressure as sell-offs resume, and Litecoin may struggle to hold above the $50 level.
Litecoin continues in the “bearish phase,” but if it pushes above $80, it could signify a trend reversal, with the next target around $100. Traders should also note that Litecoin’s price is closely correlated with Bitcoin, and if Bitcoin surges above $25,000, Litecoin could reach $65 or even $70.
Signs Pointing to Continued Decline for Litecoin
Economists have warned of a potential global recession, and many believe that Litecoin’s price could decline further. The price is currently stable above $50, but a break below this support could signal that Litecoin will likely test the crucial $40 support level. Litecoin’s price is highly correlated with Bitcoin’s price, so when Bitcoin declines, it typically exerts a negative impact on Litecoin’s price.
Litecoin Price Predictions from Analysts and Experts
Despite significant sell-offs in recent months, many analysts remain bearish on Litecoin. The third quarter of 2022 is expected to be a difficult period for Litecoin, and according to Mike Novogratz, CEO of Galaxy Digital, cryptocurrencies could drop by over 50% from current levels. Grayscale’s “Bear Markets in Perspective” report suggests that the current bear market may continue for another 250 days, while Daniel Cheung, Co-founder of Pangea Fund, believes that August could be the worst month for cryptocurrencies.
American investor Jeffrey Gundlach expressed that he wouldn’t be surprised to see Bitcoin fall to $10,000, and if that occurs, Litecoin (LTC) could drop below $30. Jeong Seok-moon, head of South Korean exchange Korbit, noted that the crypto winter could end before the year concludes, but the US Federal Reserve’s measures to combat high inflation will continue to impact the crypto markets for the foreseeable future.
