It’s been just over 3 months since I last talked markets, at the time a single Litecoin was valued at $46. Back then I made a prediction based on on-chain trend analysis comparing transactions and market price in an attempt to find a fundamental stable value. In my previous writings I stated:
“This ratio is roughly 600 Txs : 1 USD with an acceptable error drop off of around +-30%. Yes, that is a significant value but in relation to volatility this would put the current Litecoin upper and lower bounds at $61 and $33 respectively. If we continue to see this steady increase in transaction usage on the network we should likewise expect to see price follow.”
Well prices now sit at just over $61 and is right under the logarithmic multi year down trend that began in 2017 as well as the horizontal resistance of ~$65. Considering recent trends in the crypto space, I am looking for a confident and solid breakout to the upside.
TX:Price ratio analysis, is currently undervaluing the network based on my methodology. As of writing, the daily network transactions have risen from ~20,000/day to ~45,000+/day, a drastic increase which gives us the lower, middle and Upper bounds of $52.5, $75 and $97.5 respectively.
“Anything outside these bounds and price can be considered overvalued or oversold fundamentally.”
We have not seen sustained network usage at this level since the beginning of 2018, the main difference being back then price was incredibly over valued according to TX:Price ratio, likely indicating that the network has adequately matured 3 years on to hold these prices.
I have noted previously and will repeat, that transactions can be spammed higher, however, the activity Litecoin is seeing has been sustained and growing at a steady rate alongside the rest of the market, so i see no cause for concern at these levels.
Upon a breakout, the only resistance Litecoin will have left is horizontal levels, the first of which is at $81 and the second at $140. Assuming trends continue it looks like Litecoin will be on track to revisit the triple digits once more before the end of 2020 and this time hopefully permenantly.