We have mentioned the importance of volume before in the crypto market. The pattern is very interesting and while not predictive seems to give an indication of direction. Today’s sell-off across the crypto community has been harsh but we have seen this before. Ripple (XRP) and Litecoin (LTC) are showing interesting patterns which should be watched for possible recovery or further decline.
This chart shows Litecoin’s (LTC) market history with the several bull runs and subsequent decrease since inception. At the bottom of the chart is the associated market volume and what we see is increasing volume with price appreciation and sudden drop in volume with decreases. Next we will take a look at how today compares with Ripple (XRP) and Litecoin (LTC). We paid our graphics guys extra for the cool arrows. This middle bull run is more subtle as it was much smaller and is nearly lost on the long time horizon.
The latest market darling is Ripple (XRP) from the new generation of crypto’s has had a very nice run recently. IT has had a string of good news that has propelled Ripple from obscurity into #4 by market share. Today it is giving back some profits and is now well under the all time high. Take a look at the volume during the last 48 hours and compare to the volume. Milton really worked with the engineers to get this graphic correct.
The red arrow shows the floor of volume prior to the run-up while the bi-direction arrows show how volume peaks each time the price peaks. At press time volume had still not returned to pre-run levels so the price could move lower. This needs to be watched as each time the volume increased price followed during the decline. The trend however is still lower with each peak smaller than the previous. Watch Ripple’s volume over the next 24 hours to get an idea what direction might be next.
Litecoin has been around nearly as long at Bitcoin which is why we like to use is as a reference for volume to price comparisons. It has a much longer history to look at and we have used it before to demonstrate this link. Below is the last 48 hours for Litecoin and the pattern is a bit different then previous market declines which is interesting.
Litecoin (LTC) actually decreased volume into the run-up yesterday over $100 a coin. Then, despite the decline it continued to trend upward through the decline and like Ripple is now at a volume above where it started. Litecoin is also only down 8% while Ripple is down 14% over the last 24 hours and the volume on Litecoin seems to indicate a bit more strength in the down market for Litecoin vs Ripple.
For reference, here is the last decline from Litecoin and the volume with it to see that it fit more with the Ripple example above. Volume peaks at price peak and then declines with the price. The trend of increasing price follows the trend of increasing volume.
Volume vs Price
We have covered the link between volume and price previously with Bitcoin as it is the market gorilla. Understanding the leader may help show us the direction the market might head next. This next chart shows Bitcoin with a similar pattern to Litecoin showing strength into the downturn. This may indicate simple profit taking as volume remains robust and the absence of bad news.
Here we see no decline in volume as we had with previous corrections. Volume continues the upward trend even during the sell-off and decline. At press-time Bitcoin had recovered much of the decline and seems to confirm some profit taking and re-entry into the market at lower prices for traders.
Market corrections happen. When profit is made smart traders lock in some of those profits and if a buying opportunity presents and the coin is strong they will re-enter without reservation. We see this in Bitcoin and starting with Litecoin while Ripple is lagging a bit and has not recovered. This may mean there is an opportunity to re-enter Ripple prior to the return of traders. Watch the volumes and prices going forward and see if it plays out to be true.