Litecoin network usage has grown in correlation with price for the first time since 2017.

Understanding and accurately evaluating Litecoin is difficult. Measuring actual market demand and usage rather than mere speculation is no easy task. Therefore, it can sometimes be useful to fundamentally examine the network and filter out the noise.

Previously, I mentioned the volume of transactions being sent over the network, noting that the volume remains steady at around 20,000 transactions per day. This is despite market prices moving erratically as speculators place bets. From $180 to $23 over two years, this $20,000 remained remarkably consistent, demonstrating what appears to be a baseline level of network usage. Unless you have access to professional data tools and quality testing, and you are not sure who or what is behind this usage, these trading figures can lead to higher spam rates at a lower cost.

That is, when comparing market prices to trades, a familiar pattern emerges: scaling linearly (min-max). The trading value is around $35, which appears to have acted as a floor to support the market price on several occasions, and is also very close to the 2018 low of $23. The price didn’t stay there for long and I expected it to recover quickly and move up around ~$34 for a few months before rising.

We may not like it, but this seems to be a rather sound indicator of network valuation. But don’t despair, as there appears to be a growth correlation between the two metrics. This is a phenomenon not seen since early 2017, according to data provided by bitinfocharts. Unlike the halving price gains, this appears to have a healthy correlation with both moving at the same pace over the past two months.

Looking back to 2017, this correlation continued with high accuracy all the way to market peaks. This ratio is approximately 600 Txs : 1 USD, which results in an acceptable error reduction of approximately +-30%. Yes, this is a significant value, but with respect to volatility, the current Litecoin upper and lower bounds are $61 and $33 respectively. With a little bit of coding, it can be turned into a Bollinger Bands type indicator.

Anything outside of these ranges and prices can be considered overvalued or oversold by default, but since a breakout on the upside is actually a run away, this mostly becomes an indicator of a buy zone where prices are always revisited. If the network continues to see transaction usage growing steadily, we should expect prices to follow.