Litecoin Setup Can Take the Crypto 50% LowerSince the Litecoin Network went live in October 2011 it has exploded in both usage and acceptance among merchants. With a market cap of approximately 14 billion USD, Litecoin (LTC) has counted among the top ten cryptocurrencies by market capitalization for most of its existence.
The cryptocurrency was created by Charlie Lee, a former Google employee, who intended Litecoin to be a "lite version of Bitcoin," in that it features many of the same properties as Bitcoin but lighter in weight.
Nearly eleven months ago, the crypto plummeted to as low as $24 during the coronavirus crash. Last week, it reached a high of ~$230 a share. Holding Litecoin for the past 11 months would have resulted in a total gain of 806%.
Litecoin Might Stage a 50% Reversal
So is Litecoin a buy at its current price of $206 or should we wait for a bigger drop? From an Elliott Wave perspective, there is something to worry about.
Litecoin’s daily chart reveals that its 11-month journey is forming a textbook five-wave impulse. From its September 2020 low of $41.3 the market has been advancing in five-wave in wave ((iii)) in circle. The pattern is labeled (i)-(ii)-(iii)-(iv)-(v), where the price has the potential to make a last swing higher to around $230-$260 to complete wave (v) green.
If this count is correct, a five-wave impulse pattern will be considered completed in wave ((iii)) in circle. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. Fourth wave corrections usually find support at the previous fourth wave of lower degree, which means a decline back to $145-$118 a coin can be expected.
All in all, Litecoin seems like a risky bet to us near the recent high. The chart above suggests that a 40-50% sell-off is plausible once wave (v) is completed.
The Good News
Once and if this correction really happens, Litecoin would be a screaming buy once again and take the price to a new high. For now, we’ll watch from a safe distance.
