Bitcoin (BTC) could be in for a sudden price pullback, as litecoin (LTC), which doubled in value in the first quarter and led the crypto markets higher, is now showing signs of weakness.
BTC, the leading cryptocurrency by market capitalization, hit a five-month high of $5,627 yesterday and is currently trading at $5,450 on Bitstamp, representing a 1 percent drop on a 24-hour basis. That figure, however, is still up 10 percent from the low of $4,940 registered on April 15.
While BTC scored double-digit gains in the last 10 days, litecoin, the world’s sixth largest cryptocurrency, fell 13 percent. At press time, LTC is trading at a three-week low of $73 on Bitstamp.
If there is indeed a correlation between price trends of the two cryptocurrencies, litecoin’s bearish divergence is bad news for BTC, as seen in the chart below.
Both litecoin and bitcoin pretty much moved in tandem from mid-December to the end of January.
The crypto market leader, bitcoin, picked up a bid near $3,100 on Dec. 15 and jumped to highs above $4,200 on Dec. 24. Further, BTC charted a bullish higher low near $3,300 in the first week of February, confirming seller exhaustion.
Litecoin also bottomed out at $22 in mid-December, but charted a bullish higher low near $29 on Jan. 22 – two weeks before BTC did the same. Subsequently, LTC broke into a bull market with a head-and-shoulders bullish reversal with a 30 percent gain on Feb. 8.
By mid-March, LTC was reporting a 100 percent gain on this year’s opening price of $30, while BTC remained stuck in the bear market below $4,000. Notably, the longer-term bull breakout for BTC happened on April 2 – almost two months after litecoin’s inverse head-and-shoulders breakout.
So, LTC appears to have led bitcoin higher in the first 3.5-months of the year and its recent weakness, as discussed above, might end up dragging BTC lower.
It’s worth noting that LTC is set to undergo mining reward halving in August this year, while BTC’s halving event is due sometime in May 2020. Both BTC and the broader markets are likely to track the action in the LTC market in the near future.
BTC, therefore, risks falling back to…
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