Litecoin (LTC) has broken the $400 mark, reaching a new best high price of $414 on Bitstamp on Monday.

The problem with buying Litecoin is that it has get too expensive in a very little period. The world's tenth-largest cryptocurrency past marketplace capitalization is worth 215% more it was at the beginning of this year, soaring from $124.42 to a new record loftier of $413.90.

Its massive rally has beaten traditional markets on a yr-to-date timeframe, with many independent analysts now predicting the move to extend toward $500.

Rotational trading

Heart-popping returns in the Litecoin market came on the heels of a wide upside move in the cryptocurrency market place. The silver crypto'due south top altcoin rivals, including Ether (ETH), XRP, Cardano (ADA) and many others, posted meliorate profits, with Dogecoin (DOGE), a joke cryptocurrency, rising by more 17,000% YTD at ane point.

Jason Lau, chief operating officeholder of Okcoin — a San Francisco-based crypto service business — highlighted a brewing inverse correlation between Litecoin and Dogecoin, noting that the DOGE/USD exchange rates dropped past 12% in the period that saw the LTC/USD exchange rates popping college by 12%.

Meanwhile, the Litecoin Dominance Index, a metric that measures Litecoin'south strength against the residue of the cryptocurrency market place, increased from 0.96% on Sunday to as loftier as ane.xi% on Monday. That farther reflects a sentimental shift to the Litecoin markets as other alternative cryptocurrency rallies show signs of cooling off.

Litecoin Dominance Index recovers amid rotational trading. Source: LTC.D on TradingView.com

Only Litecoin is now grappling with the same overvaluation risks that caused Dogecoin's price to crash by as much as 33% in the previous sessions. At the core of this bearish illustration lies a classic momentum oscillator indicator, dubbed as the Relative Strength Alphabetize (RSI), that has historically predicted potential price reversals in global markets. It now tells the same story about Litecoin.

Litecoin overbought?

The LTC/USD daily chart shows its RSI at an inflection level near 79.02. That is 9 points higher up the overbought threshold, which has earlier led to price corrections.

Litecoin price's response to college RSI levels in contempo history. Source: LTCUSD on TradingView.com

Typically, a brusque-term tendency reversal in the Litecoin market — when its RSI tops out — leads the price to test the 20-day exponential moving boilerplate (the green wave) as interim back up. Meanwhile, an extended sell-off prompts traders to treat the 50-day uncomplicated moving average (the bluish wave) acting equally the principal downside target.

Therefore, a potential pullback following the recent explosive move risks sending LTC/USD to $252–$310 based on current moving boilerplate valuations.

Macroeconomic catalysts

Abroad from technicals, the macroeconomic catalysts keep to support cryptocurrency markets on the whole.

A study conducted by Charles Schwab showed that more than 51% of Millennials and Generation Z investors would more probable invest in cryptocurrencies than traditional stocks. Their interests in the emerging digital assets sector have surged in the wake of inflation and dollar devaluation fears, especially equally the central banks effectually the world answer to the coronavirus pandemic with easing budgetary policies.

The United states of america Federal Reserve, for example, has clarified that information technology would continue its $120-billion monthly asset buy program while maintaining benchmark rates about zilch at least until 2023. That has reduced the opportunity costs of belongings traditional safe havens like bonds and dollars among regional investors.

Meanwhile, the correlation between Bitcoin (BTC) and Litecoin stands near 0.40, according to information collected from Cryptowatch.