Litecoin ATVWAP

Litecoin ATVWAP
LITECOIN ATVWAP
22.04.2019
ALL-TIME VOLUME WEIGHTED AVERAGE PRICE
CHRISTIAN OTT
AUTHOR
Introduction
Recently, I put a spotlight on using the all-time volume weighted average price (ATVWAP) to evaluate, whether the price of Bitcoin is overbought or oversold (find the detailed article here: Bitcoin ATVWAP). It is basically an average daily price, with every price point being weighted by its daily trading volume. The ATVWAP is not limited to BTC though, it also offers interesting insights for the price of other cryptocurrencies. In this article, it will be applied to Litecoin.

Trading Volume
Litecoin’s trading history has been well-documented since the mid of 2013. In the last 6 years, LTC never traded below a dollar and went up as high as 375 USD in December 2017. Since July 2013, Litecoin traded on 1131 days between 1 and 10 USD, on 448 days between 10 and 50 USD, on 298 days between 50 and 100 USD and on 192 days above 100 USD. Litecoin’s overall trading volume has increased over the years. While it was around 1 million Litecoin traded per day from 2014 – 2016, it increased to 5.5 million LTC per day in 2017 and 2018. In 2019, Litecoin’s volume has reached new highs though, with a daily trading volume across exchanges of 27 million Litecoin per day.

However, Litecoin’s trading history didn’t start in mid-2013, its trading history goes back to October 13, 2011, where it first started trading at 0.01 USD. Litecoin’s historical trading data before mid-2013 is incredibly hard to find though, especially when it comes to trading volume. I could not find a single source for Litecoin’s trading volume before mid-2013, which unfortunately forced me to improvise. Since Bitcoin’s and Litecoin’s trading volume has been highly correlated over the last 5 years (correlation coefficient of 0.88), I derived Litecoin’s trading volume prior to July 2013 from Bitcoin’s daily trading volume in that time span. That may not be very precise but is the best approach available. Nevertheless, it is quite obvious, that Litecoin’s trading volume is way lower in its first two years, than from mid-2013 on. The following graphic underlines this by showing Litecoin’s trading volume per price range:
3.2B2.4B1.6B800M0.01$100$.10$–  .01$1$–  .10$10$1$50$10$><100$50$LITECOINTRADING VOLUME PER PRICE RANGE(IN LTC)
Litecoin ATVWAP (in USD)
As the graphic shows, Litecoin has been trading in many different price ranges since late 2011. It is therefore difficult to determine a “fair” price, that is significant but also not too complicated to calculate. An average price of Litecoin over time (currently at 25 USD) wouldn’t be significant since its trading volume was way higher above a dollar, then it was when Litecoin traded below 10 cents. Instead of the average price, I suggest using the all-time volume weighted average price (ATVWAP), which weights each daily price with the volume it was traded at. The following chart shows both the daily price movement and the corresponding ATVWAP value.

LITECOIN(IN USD)ALL-TIME VWAPATVWAP (USD)VOLUME(LTC)DAILY PRICE(USD)2012201320142015201620172018.001$0.01$0.1$1$10$100$1000$
Litecoin started trading on October 13, 2011. In its first 8 months, the public interest in trading Litecoin was very low, leading to a price decline from 3 cents in November 2011 to 0.3 cents in May 2012. From that point on, the price went up massively in three waves. The first wave sent the price from 0.3 cents in June 2012 to 9 cents in October 2012. The second wave increased the price from 7 cents in March 2013 to 5 USD in April 2013. The third wave led to a price increase from 2 USD in October 2013 to a temporary high of 53 USD on November 28, 2013. Litecoin therefore increased its US Dollar valuation by an absolutely incredible 21,200 times or 2,120,000% (!) in a time span of 1.5 years.

During that run-up, Litecoin’s trading volume increased from around 10,000 Litecoin per day to around 1,000,000 Litecoin per day, so it is fair to say that once interest in Litecoin picked up, the illiquid order books couldn’t meet the demand and the price increased massively. The ATVWAP underlines this as well – while Litecoin’s average price was at 1.1 USD at the day of its temporary all-time high of 53 USD on November 28, 2013, its all-time volume weighted average price was at 3.2 USD, which is 3x higher than the average price.

In the years after that massive bull run a decline and accumulation period followed. Litecoin went down all the way from 53 USD in November 2013 to a low of 1.1 USD in January 2015, trading both way below its ATVWAP value of 9 USD and its average price of 4.5 USD. After that massive retracement of 98% from its high in 2013, Litecoin went up again from 1.5 USD in May 2015 to 6.5 USD in July 2015, followed by an accumulation period, where it traded between 3-5 USD for nearly two years until April 2017. The ATVWAP value acted as a resistance level from April 2014 to April 2017, which was tested three times (12.5 USD in April 2014, 6.4 USD in July 2015, 5.5 USD in June 2016).

After the price finally broke through the ATVWAP resistance in April 2017 though, a hefty price increase followed. Starting from 4 USD at the end of March 2017, the price went up to a high of 375 USD on December 19, 2017, which is an increase of nearly 94x or 9,400% in 9 months. At Litecoin’s all-time high, its ATVWAP value was at 35 USD, so around 90% lower than the daily price. After that run-up, a massive correction followed, sending Litecoin’s price as low as 23 USD in December 2017, which is a 94% retracement from its all-time high.

As we saw from April 2014 – April 2017, the ATVWAP acted as a resistance again in the 2018 price decline. Litecoin’s daily price went below the ATVWAP value of 62 USD on August 10, 2018 and retested it multiple times in September. After it couldn’t manage to climb above the resistance level, Litecoin declined to its 2018 low of 23 USD, a low that was almost perfectly predicted by Litecoin’s average price (at 24 USD at that point in time). In anticipation of the upcoming Litecoin halvening, it bounced from its average price level and also managed to climb above its all-time volume weighted average price again in March 2019 and went up all the way to a high of 97.5 USD. Currently, Litecoin’s daily price is at 77 USD, with an ATVWAP of 56 USD and an average price of 25 USD.

Litecoin ATVWAP (in BTC)
Unfortunately, most cryptocurrencies’ USD valuations highly depend on Bitcoin’s USD valuation. Therefore, a LTC to BTC chart should reveal more of Litecoin’s independent market moves. The following chart displays LTC’s daily price and its ATVWAP, both in BTC:

LITECOIN(IN BTC)ALL-TIME VWAPATVWAP (BTC)VOLUME(LTC)DAILY PRICE(BTC)2012201320142015201620172018.0005.005.05
The chart shows, that Litecoin’s trading patterns have been very volatile against BTC. Overall, Litecoin has been trading between 0.0005 BTC and 0.05 BTC per LTC. Litecoin’s recurring trading pattern seems to be a massive increase in a short time span and a decline in a longer time span after that. The chart shows 8 massive price increases in a short time span, 4 of them until the end of 2013 and the other 4 since 2015.

Let’s focus on the trading data from October 2013 onwards, since the early price movements of Litecoin were based on very low volume. While the first price increase on very high volume sent the LTC price to a high of 0.04 BTC in December 2013, its price increases in the following years went only as high as 0.02 – 0.025 BTC per Litecoin. The chart shows, that Litecoin has mostly traded in a range between 0.005 BTC and 0.025 BTC in the last five years. Buying Litecoin above its ATVWAP valuation in BTC didn’t necessarily turn out profitable in the long term, since it has been returning below its all-time volume weighted average price after every price increase.

From October 2013 on, Litecoin has also struggled to reach new higher highs in its BTC valuation. Its high in December 2013 was at 0.041 BTC, its high in July 2015 was at 0.025 BTC, its high in February 2018 was at 0.023 BTC and its most recent high in April 2019 only went as high as 0.018 BTC. In the last 5.5 years, Litecoin only traded 33% of the time above its all-time volume weighted average price in BTC, but on 67% of the days below its ATVWAP.

Wrap-up
While Litecoin’s USD valuation chart outlines a long-term growth, its BTC valuation chart shows, that Litecoin has been trading in a range for the last 5 years and has also struggled to make higher highs against Bitcoin. Against BTC, it had several pumps, where the price increased very quickly, followed by a longer period where the price declined. In Litecoin’s USD valuation chart, the ATVWAP acted as a long-term resistance from April 2014 – April 2017. Once Litecoin broke through this resistance, its price increased up to 94x. Litecoin’s all-time average price nearly perfectly predicted the 2018 bottom of 23 USD. The ATVWAP has been a useful indicator in Litecoin’s BTC valuation chart in the past, since a daily price of Litecoin above its ATVWAP has been a good selling point and a daily price of Litecoin at least 30% below its ATVWAP has been a good buying point.



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