Litecoin (LTC) may be 60% off its December 2017 all-time high of $ 420, but that hasn’t stopped its open positions in its futures contracts from reaching a record $ 584 million. This makes LTC the seventh largest crypto currency in terms of market capitalization and third in derivatives after Bitcoin (BTC) and Ether (ETH).
Litecoin futures aggregate open positions. Source: Bybt.com
As shown above, LTC futures open positions have increased 285% over the past three months. It should be noted that such an event is not necessarily a positive one, as futures contracts require both a buyer (long) and a seller (short). However, this increasing interest allows even bigger players to get involved.
Another interesting development is the recent listing of Ether Futures contracts on the Chicago Mercantile Exchange (CME), which serves as an indication that other cryptocurrencies may soon follow suit.
Litecoin is the third largest holding in the Bitwise 10 Crypto Index Fund (BITW), and that fund’s assets under management recently exceeded $ 780 million.
Grayscale mutual fund holdings. Source: grayscale
The Grayscale Litecoin Trust (LTCN) is adding another $ 210 million under management assets originally issued to institutional investors. These growing numbers clearly demonstrate Litecoin’s potential.
Longs are still under water
By looking at daily liquidations, investors can better appreciate how traders have used leverage. Unexpected price swings will tend to result in higher liquidations than current trends, like the recent Litecoin rally from 15% to $ 174.
LTC futures aggregate the daily liquidations. Source: Bybt.com
In the graph above, the largest green candle represents longs whose positions were forcibly exited on January 10th as the LTC price fell 32% in 18 hours.
On the flip side, the February 5 rally liquidated to $ 164 million in shorts worth $ 56 million, but that still doesn’t compare to January’s bearish move of $ 128 million.
Volume failed to sustain the recent rally
Litecoin’s failure to break the $ 186 high from Jan. 10 was followed by a decline in volume, indicating a lack of interest at current levels. LTC’s total trading volume is down 12% in the past 30 days.
LTC Spot Exchange Volume, USD. Source: Coinalyze.net
The current open interest in futures interest of $ 584 million is substantial when compared to LTC’s average daily trading volume on spot exchanges of $ 980 million per day.
From a price analysis perspective, both Litecoin and Bitcoin Cash price developments seem to lag behind Bitcoin’s bearish and bullish movements. Retailers and institutional distributors are likely to be aware of this relationship.
Also, given Etheruem’s high gas fees and Bitcoin’s rising transaction costs, traders should also consider that investors looking for faster transfers and cheaper fees could fuel an extended Litecoin rally.
If Litecoin’s privacy features are implemented at some point, it could finally give the altcoin the much-needed boost to crack $ 200, and targets near $ 300 aren’t outrageous.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.
