Record $584M Litecoin futures open interest signals institutional inflow


Litecoin (LTC) may be 60% lower than its December 2017 high of $ 420, but that hasn’t stopped the futures opening from reaching a record high of $ 584 million. This makes LTC the seventh largest cryptocurrency by market cap and the third in derivatives, after Bitcoin (BTC) and Ether (ETH).

The total open interest on Litecoin futures. Source: Bybt.com

As shown above, the overall open interest rate on LTC futures has increased by 285% over the past three months. One must bear in mind that such an event is not necessarily positive because a futures contract requires both the buyer (long term) and the seller (short term). However, this increased interest is allowing more key players to participate.

Another interesting development is the Chicago Mercantile Exchange (CME) futures list which is an indication that other cryptocurrencies may soon follow suit.

Litecoin is the third-largest holding in the Bitwise 10 Crypto Index Fund (BITW), and assets under management in that fund recently exceeded $ 780 million.

Gray scale mutual fund holdings. Source: Grayscale

The Grayscale Litecoin Trust (LTCN) also adds another $ 210 million worth of assets under management that were initially released to institutional investors. These increasing numbers provide clear evidence of Litecoin’s potential.

Longs are still underwater

By looking at the daily liquidation, investors can better assess how traders are using leverage. Unexpected price fluctuations tend to cause liquidations higher than those persistent trends, such as Litecoin’s recent 15% rally to $ 174.

Total futures LTC liquidation daily. Source: Bybt.com

In the chart above, the largest green candle represents long positions after ending their trades strongly on January 10, as the LTC price fell 32% in 18 hours.

On the other hand, the February 5 high to $ 164 cleared short positions of $ 56 million, but this still did not match the January downward movement of $ 128 million.

Volume failed to maintain the recent high

The failure of Litecoin to break through the $ 186 peak as of January 10 was followed by a drop in volume, indicating a lack of interest in current levels. LTC’s total volume has decreased 12% in the past 30 days.

LTC spot exchange volume, in US dollars. Source: Coinalyze.net

The current open interest for futures contracts of $ 584 million is significant when compared to LTC’s average daily trading volume of $ 980 million on spot exchanges.

From a price analysis point of view, the price action of both Litecoin and Bitcoin Cash appears to be lagging behind the bearish and upward movements of Bitcoin. It’s likely that retailers and institutions are familiar with this relationship.

Traders should also consider considering Etheruem’s higher gas fees and increasing Bitcoin transaction costs, Litecoin’s sprawling rise could be driven by investors looking for faster transfers and cheaper fees.

If Litecoin’s privacy features are finally implemented, this could ultimately give the much-needed altcoin to break $ 200 and targets close to $ 300 aren’t outrageous.

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