Litecoin Price May Fall 30% If Historic LTC Futures Trend Repeats

A multi-year review of Litecoin futures open interest reveals a unique trend that has had a significant impact on LTC price in the past.

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With less than two weeks to the Litecoin halving, when the miner's block subsidy will be halved, traders are wondering if the added scarcity effect will be enough to keep the price of LTC above $90.

The price of Litecoin (LTC) is down 19% in the last 18 days, but it has shown a positive performance of 31% this year. Notably, most of the gains took place between June 29 and July 2, with a 34% surge pushing the price to a 14-month high of $115.

1-Day Litecoin/USD Price at Coinbase, 2023. Source: TradingView

However, there is an alarming statistic from the derivatives market indicating that a sharp correction is likely underway.

Historical Data Does Not Favor Litecoin Bulls

Each of the previous three instances where Litecoin futures open interest fell below $500 million caused prices to decline by 38% or more, potentially consistent with the current scenario.

Overall Litecoin dollar futures open interest from June 29 ($300 million) to July 2 ($615 million) shows that there has been a significant increase, indicating increased demand for leveraged futures.

On July 2, the price of Litecoin hit a 14-month high, but then fell 20% to $92. However, the worrying aspect is that the open interest of Litecoin remains above the $500 million mark. This suggests that buyers have added some margin to avoid the sell-off, but the risk of a sharp correction remains.

Litecoin futures accrue open interest in USD over the past year. Source: CoinGlass