- PayPal’s support for Litecoin triggered the recent bullish price action.
- LTC / USD Loses Strength Towards $ 60 As Investors Sell News; a correction to $ 50 is likely.
Litecoin was trading close to $ 70 in August, following a notable recovery from the March crash. However, the crypto asset has resumed the downtrend within a parallel descending channel. For more than two months, LTC / USD sustained breastfeeding injuries but was treated with occasional pull-ups.
The support in September, slightly above $ 40, paved the way for the ongoing recovery. Litecoin broke through the resistance of the channel, extending the bullish leg above $ 50. Meanwhile, the bullish pressure appears to have run into immense seller congestion below $ 60.
The PayPal effect is diminishing
Litecoin’s rally is attributed to PayPal’s recently announced crypto service. The platform will allow users to buy and sell cryptocurrencies such as Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Users will also be able to purchase goods and services from 26 million merchants using these cryptocurrencies.
PayPal CEO Dan Schulman said the move to digital payments is imminent. Digital payments bring efficiency, speed and resilience. PayPal’s decision to include cryptocurrencies as a service appears to be one of the most significant supports for the cryptocurrency industry in 2020.
As the news stabilizes, Litecoin appears to be slipping into retreat. The bullish outlook at $ 65, as discussed above, is unlikely to occur, at least for now. LTC / USD is trading hands slightly below $ 55.
Refusal and reversal on the horizon
The Relative Strength Index (RSI) touched the overbought area. Although Litecoin is not entirely oversold, a decreasing volume index suggests a breakout is in sight. Furthermore, a death cross is likely to come into play when the 100 simple moving average (SMA) crosses below the 50 SMA in the daily time frame.
LTC / USD daily chart
On the other hand, support is expected at $ 52, but LTC may revisit the $ 50 level if the bears persist. The TD sequential indicator recently issued a sell signal in the form of a green nine candle, adding weight to the bearish outlook.
All three moving averages applied to this chart, 50 SMA, 100 SMA and 200 SMA, have turned into support areas. Therefore, the downside is unlikely to extend below $ 50.
LTC / USD 4-hour chart
According to IntoTheBlock’s IOMAP model, Litecoin is facing increasing resistance heading for $ 60. The strongest support zone is from $ 60 to $ 61. Previously, nearly 54,000 addresses bought around 2.3 million LTC in the interval.
On the downside, the most vital anchor zone holds land between $ 50 and $ 52. Here, around 75,000 addresses have previously bought about 3.5 million LTC. Losses below this area are questionable; furthermore, the immense concentration of buyers appears to extend to $ 46.
Litecoin IOMAP model
Santiment, a leading on-chain data provider, highlights a spike in social media citations related to Litecoin. The surge coincided with the news from PayPal, followed by a significant upward price movement. Likewise, the peak in social volume is an indicator of high volatility and massive bullish action.
Litecoin social volume chart
On the other hand, it is necessary to keep in mind that the increase in mentions on social media platforms does not stay forever. Eventually, investors start selling the news as social volume decreases just as illustrated in the graph above, increasing the selling pressure.
Looking at the other side of the image
It is worth mentioning that Litecoin has room for growth until it reaches the intense selling pressure at $ 60. Perhaps the $ 60 approach could lure buyers back to the market and complete the leg up to $ 65. Also , the support at $ 52 is likely to shift attention to $ 60 and $ 65, placing LTC in an upward trajectory.