The price of Litecoin has reached an all-time high of $400, but the LTC boom is at risk of overheating.

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In the midst of a crypto trading surge, the price of Litecoin has reached $400.

Litecoin (LTC) has smashed through the $400 barrier, hitting an all-time high of $414 on Bitstamp on Monday.

The issue with purchasing Litecoin is that it has been prohibitively costly in a relatively short amount of time. The world’s tenth-largest cryptocurrency by market capitalisation is now worth 215 percent more than it was at the start of the year, having risen from $124.42 to a current peak of $413.90.

On a year-to-date basis, the massive surge has beaten conventional stocks, with multiple independent observers already forecasting the jump would stretch towards $500.

 

Rotational trading

Stunning returns in the Litecoin market followed a broad upward step in the cryptocurrency market. Top altcoin competitors, such as Ether (ETH), XRP, Cardano (ADA), and several others, reported higher earnings, with Dogecoin (DOGE), a prank cryptocurrency, increasing by more than 17,000 percent YTD at one stage.

Jason Lau, chief operating officer of OKCoin, a San Francisco-based crypto service company, highlighted a developing inverse association between Litecoin and Dogecoin, noting that the DOGE/USD exchange rates fell by 12% over the same time that the LTC/USD exchange rates increased by 12%.

Meanwhile, the Litecoin Dominance Index, which tests Litecoin’s power relative to the rest of the cryptocurrency industry, rose from 0.96 percent on Sunday to as high as 1.11 percent on Monday. This represents a sentiment change to the Litecoin markets as other alternative cryptocurrency rallies seem to be cooling.

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Litecoin Dominance Index recovers amid rotational trading. Source: LTC.D on TradingView.com

However, Litecoin is now facing the same overvaluation risks that led Dogecoin’s price to plummet by up to 33% in the previous sessions. The Relative Strength Index (RSI), a classic momentum oscillator measure that has traditionally forecast possible price reversals in financial markets, is at the heart of this bearish comparison. It now tells the same Litecoin tale.

Litecoin overbought?

The LTC/USD daily chart shows its RSI at an inflection level near 79.02. That is 9 points above the overbought threshold, which has earlier led to price corrections.

Litecoin price’s response to higher RSI levels in recent history. Source: LTCUSD on TradingView.com

Typically, as the Litecoin market’s RSI peaks, the price would challenge the 20-day exponential moving average (the green wave) as intermediate support. Meanwhile, a prolonged sell-off leads traders to see the 50-day simple moving average (the blue wave) as the primary downside goal.

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As a result, based on current moving average valuations, a possible pullback following the recent explosive jump could take LTC/USD to $252–$310.

Macroeconomic catalysts

Away from technicals, the macroeconomic catalysts continue to support cryptocurrency markets on the whole.

A study conducted by Charles Schwab showed that more than 51% of Millennials and Generation Z investors would more likely invest in cryptocurrencies than traditional stocks. Their interests in the emerging digital assets sector have surged in the wake of inflation and dollar devaluation fears, especially as the central banks around the world respond to the coronavirus pandemic with easing monetary policies.

The Federal Reserve of the United States, for example, has stated that it will extend its $120-billion monthly asset buying policy while keeping benchmark rates at zero until at least 2023. Among regional buyers, this has reduced the opportunity costs of owning conventional safe havens such as bonds and dollars.

Meanwhile, the correlation between Bitcoin (BTC) and Litecoin stands near 0.40, according to data collected from Crypto Watch.

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