The Unexpected Effects Of The Litecoin Halving


Jul 2, 2019
Litecoin experienced its second halving on 5 August 2019. This means that the rewards for producing a block on the Litecoin network are now 12.5 LTC, half of the previous 25 LTC reward. Halving on the Litecoin network occurs roughly every four years. What usually interests users is the overall effect that a halving has on a network. Hence, the question, what were the unexpected effects of the Litecoin halving?

Coin halving is usually a big occasion for cryptocurrency users, for miners and traders alike. The halving event is a major fundamental indicator to price and other elements within the network of the concerned cryptocurrency.

Pre-Halving Analysis of Litecoin (LTC)

Analyses and predictions come ahead of the halving of any given cryptocurrency. This was the same with Litecoin as many members of its community expected that there would be a surge in price for the first fork of Bitcoin.

Ahead of the event, even the creator of Litecoin (LTC), Charlie Lee, explained why he expected the price of Litecoin to go up after halving. Away from organic reasons, Lee tied his expectations to community sentiments. He explained how the behaviour of people will determine price movement, rather than actual economic factors of demand and supply.

He said;

“So a lot of people are buying in because they expect the price to go up and that’s kind of a self-fulfilling prophecy. So, because they’re buying in, the price does actually go up.”

So, did Litecoin price actually go up after halving?

At the beginning of 2019, LTC around $30. This was as a result of the general bear market that greeted the crypto industry after the ICO boom of 2017. From boom to present, Litecoin dropped from an all time high price of $375. As the market picked up after Q1 2019, Litecoin also joined the recovery trend trading around the $100 region before dropping below it ahead of the impending halving.

The Litecoin Halving Effect

Just before the halving, the Litecoin price was at $79. As the news broke of the halving the Litecoin price jumped to $100. This is the initial answer to the question “how has the halving affected Litecoin”. The surge did not last though, as soon afterwards, a retracement kicked in and overall market sentiments seemed to overshadow the effects of the halving.

Halving implies that the reward for miners in producing a bock drops by 50%. The amount of work involved does not change, nor does the electricity consumed. Therefore, many miners seem to go out of business when halving occurs. Some of the smaller miners who may not be able to keep up with the cost implications may go out of business and engage is selling off a part of their holdings. This could lead to a bear market in the short run.

A contrary view suggests that the decreasing supply of Litecoin in this case will create scarcity. By economic laws, this means that there will be increased demand for the Litecoin, hence engineering a hike in the price.

No matter your position on the argument, you must consider the overall market conditions as well, especially with respect to Bitcoin, the pioneer of cryptocurrency. For instance, a few weeks after the Litecoin halving, when a lot of people expected prices to soar higher, it fell below the pre-halving mark. At the time of writing, the Litecoin price is around $70.

What’s Next After The Unexpected Effects Of The Litecoin Halving?

The prevailing sentiment is that funds are currently moving away from altcoins into Bitcoin at the moment. Proof of which lies in the Bitcoin dominance which stands at 69%, at the time of writing.

In this industry, everything is usually factored into the price of the token; hashrate, mining difficulty, community sentiment and other elements. Therefore, if you want to understand the market conditions, you need to consider a robust approach that involves numerous factors.

Price is a product of demand and supply. However, other factors which most industry participants consider to be temporary have suppressed the Litecoin price so far. Many traders are using this opportunity to jump into the market, using peer-to-peer platforms like Vertex.Market to purchase Litecoin at its suppressed price. This is in anticipation of an eventual response to the natural forces of demand and supply.

In paying attention to the unexpected effects of the Litecoin halving, it is very clear that a wide perspective must be assumed, and the analysis must also consider a long term effect. Hence, at the time of writing, we may not assume that the effect of the Litecoin halving has fully kicked in. Until the Bitcoin dominance subsides, the crypto market will still maintain a partial lopsided outlook.