The second ever Litecoin halving is now less than 1 year away and speculation is already starting to arise as the date draws closer and the block reward drops from 25 Litecoin a block to 12.5. This deflation in new coins being minted has previously resulted in a run up in the price of Litecoin, however, historically it was not sustained and appeared to be based on the perceived value increase now that supply had become more scarce.
The last run in 2015 saw the price more than quadruple from $2 to $9 in the space of 24 days and back down to around $3 where it stayed for a further year, so beware of genuine market sentiment vs those capitalising from pure speculation.
The halving happens every 840,000 Blocks or roughly 4 years based on the block time of 2.5 minutes and is designed as a method of slowly decreasing the total supply of Litecoin until it eventually reaches 84m coins sometime in the mid 2100s.
As fewer new coins enter the market, it is easy to make the assumption that the selling pressure eases up if the price stays, leading to an increase in the assets price. Pair this with the fact that those mining effectively have their incomes halved and it is a rational assumption to assume, as a result, those new coins being minted should be worth more to offset this potential loss. However, this isn’t always true and there is a possibility that those unable to compete simply stop mining if it is no longer profitable.
While the outcome is by no means certain, it is clear that the halving is a hotly anticipated event for speculators looking to profit in this space as it only comes around once every four years and for Litecoin holders it ushers in a new phase of ever increasing scarcity within the asset.
We will certainly be keeping our eyes on market movement in the lead up to the halving to judge any reaction as well as what can be discerned from it.