Bitcoin could fall back to $5,000 in the next few days, as litecoin – which guided markets higher in the first quarter – is showing signs of weakness.
- Bitcoin’s long/short ratio has dropped well below 1.00 for the first time since Jan.1, signaling growing bearish sentiment. Further, the 14-day relative strength index is teasing a bearish divergence. Therefore, a price pullback looks likely.
- The case for a drop to $5,000 would weaken if the price bounces up from the ascending 10-day moving average, currently at $5,303.
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.
Bitcoin and litecoin daily charts
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 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 $5,000 over the next few days, and the bullish higher high established yesterday with a close above $5,466 (April 10) may fail to yield an immediate rally to $6,000.
Backing that argument is the ratio of long/short positions, which is now reporting bearish bias with a reading well below the 1.00 mid-line.
Bitcoin’s long/short ratio
As seen above, the long/short ratio has dropped to 0.8686, the lowest level since Jan. 1.
Other technical studies are also calling a pullback. For instance, the recent “golden crossover” of the 50-day moving average (MA) and the 200-day MA – is accompanied by the overbought readings on the 14-day relative strength index, as discussed yesterday.
Further, the 14-day RSI is beginning to diverge in favor of the bears.
Daily chart: Focus on RSI
The RSI will end up confirming a lower high if BTC ends in the red today. The resulting bearish divergence – a higher high on price and lower high on the RSI – would further strengthen the case for a correction.
- Source: First Appeared Here
- Published Time: 2019-04-24 12:00:39
The views and opinions expressed in the article Litecoin Led Bitcoin’s Price Rally, Now It’s Hinting at a Pullback do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.. Connect with 48coins on Facebook and share your thoughts about the post Litecoin Led Bitcoin’s Price Rally, Now It’s Hinting at a Pullback Here are some top prominent words: 14-day relative; 14-day relative strength; 14-day relative strength index; bearish divergence; bitcoin’s long/short; bitcoin’s long/short ratio; charted a bullish.
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