The percentage of profitable Litecoin wallets has risen to its highest level since 2021 after recent gains.
A bearish reversal may occur after the appearance of an 'inverse cup and handle' pattern on lower time frames.
Litecoin (LTC) has risen over 50% in the past month, reflecting widespread growth in the altcoin market. However, despite this recovery, some analysts suggest that Litecoin may have reached its peak.
In a post on X, renowned analyst Ali Martinez noted that LTC is currently trading at a price equivalent to that of 2017. Furthermore, he argued that it currently lacks strong fundamental factors to drive long-term growth.
According to him, although LTC may continue to record short-term gains, it remains stuck in an accumulation range.
Profitable Litecoin wallets have reached their highest level since 2021.
Despite this negative outlook, however, Litecoin's recent gains have led to a significant increase in the number of profitable wallets, reaching its highest level since 2021. In fact, data from IntoTheBlock reveals that 78% of LTC holders, equivalent to 6.33 million addresses, are currently profitable.
Conversely, the number of wallets at a loss has decreased from 46% to 16% in just one month.
Source: IntoTheBlock
The increase in profitable wallets may enhance market confidence and lead to a positive outlook for Litecoin.
However, some early buyers and those who bought during the recovery may start to take profits, weakening the trend.
Is a high number of addresses a positive indicator?
The number of active addresses on Litecoin is currently 364K - a higher number than most altcoins. For example, Cardano (ADA), an altcoin with a market cap four times larger, only has about 41K active addresses.
(Source: IntoTheBlock)
In contrast, looking at the long-term picture shows that the number of Litecoin addresses is trending downward. Particularly since the beginning of the year, the number of active addresses has reached over one million.
This suggests that the utility of Litecoin has diminished this year, which may negatively impact the price.
Analyzing Litecoin's price as these negative signs appear
At the time of reporting, Litecoin is trading at $123 after rising 1.57% in 24 hours. This altcoin may be on the verge of a bearish phase after the appearance of an 'inverse cup and handle' pattern on the 4-hour chart.
If Litecoin faces this downward pressure and the price turns to decline, traders should pay attention to the neckline of this pattern at $100.65. Particularly as a drop below this level could trigger further losses.
(Source: Tradingview)
The Chaikin Money Flow (CMF) index implies that buying pressure is weakening as it declines near zero. If this index turns negative, it could indicate an increase in selling activity leading to a downward trend.
At the same time, the Moving Average Convergence Divergence's (MACD) histogram indicates weak buying pressure. However, the MACD line on lower time frames remains positive - a sign that momentum is still slightly bullish.
Open interest in Litecoin has decreased.
Finally, data from Coinglass indicates that speculative activity around Litecoin has decreased after reaching multi-month highs earlier this month when open interest (OI) surged to $706 million.
At the time of reporting, Litecoin's OI has decreased to $531 million - a sign that some traders have closed their positions.
(Source: Coinglass)
The decline in OI may signify bearish sentiment as market participation decreases when traders become cautious and hesitant.
