Keep up with the latest on Crypto: Litecoin Price at Risk of a 30% Drop if Key LTC Futures Historical Trend Repeats.
Litecoin price at risk of a 30% drop if key LTC futures historical trend repeats

With less than two weeks until Litecoin’s halving, traders are questioning if the additional scarcity effect will be enough to sustain the LTC price above $90, as the crypto block subsidy will be cut in half. Despite the 19% decline in the last 18 days, Litecoin (LTC) has shown a positive 31% performance this year, with the 34% rally pushing the price to a 14-month high of $115.

However, the latest on crypto from the derivatives market indicates a sharp correction is likely underway.

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Historical data doesn’t favor Litecoin bulls

Data for the past three times when Litecoin futures open interest dropped below $500 million show that the price decreased by 38% or more, which is similar to the present situation.

From June 29 ($300 million) to July 2 ($615 million), the aggregate open interest in dollars for Litecoin futures increased significantly, indicating an augmented demand for leveraged contracts.

On July 2, Litecoin’s price hit a 14-month peak but then decreased by 20% to $92. The concerning factor is that the open interest for Litecoin remains above the $500 million mark. This implies that buyers added margin to prevent liquidation, yet the danger of a sharp correction persists.

More active contracts (open interest) are usually positive, allowing investors who need a certain market size to be involved. Although it may not be necessarily bullish for price momentum, it allows for larger price fluctuations due to leverage and potential liquidations when a trader’s position is closed due to a lack of margin.

A look back at the November 2021 crash and open interest

The three most recent occasions when Litecoin’s open interest dropped below the $500 million mark serve as a clear demonstration of investors’ waning enthusiasm, with the price taking a nosedive each time.

On Nov. 10, 2021, the open interest for Litecoin rose above $500 million, coinciding with a six-month peak of $289. However, just four days later, when the open interest dropped back below $500 million, the price of Litecoin dropped by 48% in the following 24 days.

Previous to this, Litecoin’s open interest had surged but was unable to break the $500 million barrier, despite the price climbing by 40% to $232 in early September.

Two more occasions of this same pattern occurred in 2021, between February and June, with the open interest dropping below the $500 million threshold and the price subsequently taking a dive.

Similar events in February 2021 and May 2021

On Feb. 8, 2021, Litecoin’s open interest surged above $500 million, marking a 64% price gain, which peaked at $247 on Feb. 20, 2021. However, on the same day, open interest dropped below $500 million, leading to a 38% price decline in the next eight days. Notably, the $200 psychological price support held for five days before the Litecoin price declined to $142.

Again, on May 9, 2021, Litecoin’s open interest fell below $500 million after 49 days. It reached an all-time high of $409 during that period, followed by a 71% correction in just 13 days, settling at $118.

Though causation cannot be drawn from events of over 19 months ago, it’s essential to keep an eye on Litecoin’s open interest. If it declines from the current $500 million level, history suggests a potential 30% drawdown from $94 to $62. To stay up-to-date on the latest crypto news, it’s important to keep track of the latest Voyager Crypto,, and other high street crypto trends.

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