What is Litecoin halving and how will it affect the price of LTC
Date: 2023-07-26 Author: Karina Ziganova Categories: BLOCKCHAIN
The third Litecoin halving will happen in a few days. In anticipation of this important event, analysts and crypto enthusiasts are speculating about the price dynamics of LTC
We will tell you how the Litecoin halving works, why it is so important for crypto investors and miners, and what to expect from the LTC price this time.
What is Litecoin halving?
Halving is an event during which the reward of miners for mining a block is halved. This mechanism allows you to control the inflation rate of a crypto asset and create a deficit that can increase its value over time. It is embedded in the work of all cryptocurrencies that use the Proof-of-Work (PoW) consensus.
Litecoin halving occurs after 840,000 blocks are mined – this process usually takes about 4 years. When LTC was launched in 2011, miners' block reward was 50 coins. After the first halving, which took place in 2015, it was reduced to 25, and after another 4 years - to 12.5 LTC. The third Litecoin halving, which is scheduled for August 3, 2023, will reduce the reward for mining the block by another half - up to 6.25 coins.
Why LTC halving is so important
As noted above, the Litecoin halving has a significant impact on the price and, accordingly, the market capitalization of the asset. The reduction in mining rewards incentivizes miners to continue contributing to the network, while limiting the number of new LTC entering circulation.
The reduction in supply creates a deficit, which leads to an increase in demand from investors and, accordingly, to an increase in the price of the coin - even if other market conditions remain unchanged.
How does Litecoin halving differ from Bitcoin halving?
Despite the fact that the idea and concept behind the halving of Litecoin and Bitcoin are the same, there are a few minor differences due to the difference in the nature of blockchains.
The Litecoin halving does not have the same impact on the wider market as the Bitcoin halving
At the time of writing, the market capitalization of LTC is $6.6 billion, while the capitalization of the main cryptocurrency exceeds $560 billion, which is 85 times more. Thus, the effect of bitcoin halving on the wider market will be much greater due to the dominant position of BTC.
LTC and BTC have different supply stocks
The maximum supply of Litecoin is 84 million coins, while the supply of Bitcoin is limited to 21 million. At the time of writing, miners have a little less than 11.5 Litecoin left to mine, which is 6 times the remaining supply of bitcoins.
How the Litecoin halving will affect the price of LTC
Historical data will help predict the price movement of Litecoin on the eve of the third halving.
As you can see in the chart below, from April to July 2015, the price of the asset increased by more than 440% and reached a local maximum a few weeks before the halving. At the time of the event, LTC was already in a downtrend.
In 2019, the situation repeated itself. A few weeks before the event, Litecoin soared by 375% and reached $143. Immediately after that, its price began to fall. The asset spent the rest of the year in a bearish trend and ended it at $40.
However, when the bull market finally gained momentum, LTC staged a real rally - in May 2021, it updated its all-time high of $410.
If the situation repeats itself this time, Litecoin has probably already reached its local maximum at around $113 and has moved to decline.
Summing up
The Litecoin halving is the most important event that not only affects the further price dynamics of LTC, but is also one of the key factors determining long-term sustainability and development prospects asset as a whole.
Based on historical data, we can conclude that halving is unlikely to lead to a sharp jump in price - however, trading participants should be prepared for the fact that as it approaches, increased volatility will reign in the market, and, if possible, refrain from opening new positions.
