On-chain data shows that Litecoin has recently experienced a sudden drop in tiny hands, which could have a positive impact on the price of LTC.

Smaller Litecoin investors have been showing FUD lately

In the recent fasting on X, on-chain analytics firm Santiment discussed the latest change in Litecoin’s user base. A few key metrics are relevant here: Total holders and supply distribution.

The first one, Total Holders, measures, as the name suggests, the total number of addresses on the LTC network that have a non-zero balance.

When this metric increases, recent addresses with a balance appear on the blockchain. This means that adoption is occurring, which can naturally be bullish for the asset.

On the other hand, the drop in the indicator value suggests that some investors have decided to clear their portfolios, perhaps trying to move away from the cryptocurrency altogether.

Here is a chart showing the trend in total Litecoin holders over the past few months:

As you can see from the chart above, the total number of Litecoin holders has recently dropped dramatically, which may be a sign that many investors have decided to withdraw from the asset.

While the decline shows a shift away from the network, the number of holders does not provide information about what type of investors are selling here.

This is where the second metric comes in: Supply Distribution. This metric tells us the total number of addresses currently belonging to a specific wallet group.

In the chart, Santiment has included supply distribution data specifically for investors with address balances between 0.1 and 1 LTC. This is a tiny amount, so the only holders that qualify for this group are the smallest hands: retail.

From the chart, we can see that Litecoin addresses falling within this range have recently experienced a pointed decline. Specifically, around 45,200 retail addresses suddenly cleared during this decline.

Given this trend, it seems like a immense portion of the decline in Total Holder Amount is coming from these tiny investors. While the selling itself may be bearish, the fact that retail holders are capitulating here may not be so bad.

As the analytics firm explains, “Small fish impatiently ‘jumping ship’ is often a reversal signal for assets to start turning bullish again.” So whether this market FUD will lead to a Litecoin rebound remains to be seen.

LTC price

At the time of writing, Litecoin is trading at around $62, down over 4% in the past seven days.