Litecoin (LTC), one of the pioneering cryptocurrencies, is experiencing a challenging period as its price hovers around $63. In the past week alone, Litecoin has dropped over 5%, and its value has decreased by 11% over the last 30 days. This decline follows a significant drop from its all-time high of over $410, reached in May 2021. Currently, Litecoin is grappling with a critical support level as small investors, or “shrimps,” begin to sell off their holdings.

Decline and Capitulation

Litecoin’s price has plummeted 84% since its peak, marking a substantial decrease. This downtrend has pushed Litecoin out of the top 10 cryptocurrencies by market cap, highlighting its recent struggles. The current price drop is putting pressure on small wallet holders—those with less than 1 LTC—who are now capitulating, or selling off their holdings in response to the declining value.

Market intelligence and on-chain analytics platform Santiment has reported a notable decrease in these small wallet addresses. Specifically, more than 45,200 LTC have been sold by wallets holding between 0.1 and 1 LTC. While this sell-off could indicate a capitulation by smaller investors, Santiment analysts suggest that such movements can sometimes signal a potential turnaround.

“Litecoin has not been generating much buzz as its market value dropped 36% since its peak on April 1st. The recent liquidation of 45.2K LTC from small wallets could be a sign of impending recovery. Historically, when small investors ‘jump ship,’ it can often precede a bullish trend,” Santiment noted on X (formerly Twitter).

Market Sentiment and Support Levels

Litecoin’s recent performance aligns with broader bearish sentiments. Since its price peak in early April, LTC has seen a significant decline, dropping from above $110 to its recent levels. Following a brief recovery after the crypto crash on August 5, which saw Litecoin’s price fall to $56, it has once again fallen below $64, nearing the critical support zone around $60.

Into The Block’s data reveals a concerning trend: approximately 76% of Litecoin addresses are currently in a loss at the present price. Only 18% of addresses are showing a profit. Notably, 22% of addresses have held LTC for less than a year and might be among the small holders now selling off. In contrast, 78% of addresses have held Litecoin for over a year, suggesting a more long-term investor base remains.

Technical Indicators and Future Outlook

Technical analysis provides further insight into Litecoin’s current situation. The daily price chart shows that both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators are bearish, suggesting that downward pressure might continue.

Litecoin’s price is currently below the 50-day Simple Moving Average (SMA), which is acting as a resistance level around $66. Should the price continue to weaken, LTC might test lower support levels, with a potential demand zone around $55.

Conclusion

Litecoin is navigating a challenging period marked by a significant price decline and increasing capitulation from small investors. The drop from its all-time high and the current bearish indicators suggest a tough market environment. However, historical patterns indicate that such capitulation can sometimes precede a recovery. Investors should monitor Litecoin’s price movements and technical indicators closely to gauge whether the current downturn will continue or if a turnaround might be on the horizon.