The Ultimate Go-Getter’s Guide to Litecoin Halving 2019 !
02 August 2019
“Technology divides only to strengthen itself and build wider opportunities for the newer generations.”- Rashi Aggarwal
Ever since the emergence of Bitcoin and other cryptocurrencies, we have seen the numbers of these digital currencies growing enormously. From just one to now a few thousand currencies, the numbers are multiplying each day.
All of us know the economic theory, of Supply & Demand, and what we might expect in the upcoming Litecoin Halving may be similar. Therefore, I am sharing with you a glimpse of what Litecoin Halving brings with it and what to expect after the scheduled event of this blockchain based cryptocurrency.
What is Litecoin?
Litecoin is an open-source and decentralized crypto like Bitcoin which was designed by Charlie Lee in 2011.
What is Litecoin Halving?
Just like the term “halving” suggests, Litecoin halving is the event where the number of generated LTC rewards per block will be halved.
What are LTC rewards?
Each miner mining a cryptocurrency, receives a sum of the same crypto for mining blocks of the crypto as a mining reward. Therefore, with LTC Halving in the next few days, the miner reward will be slashed to half of what is now.
The current mining reward is 25 LTC which post halving will be 12.5 LTC, which will subsequently decrease the number of LTC found per block and ensures that the total supply of LTC will reach 84 Million.
When did the last LTC Halving take place?
The first and the only halving of LTC till date took place on 25 August 2015, when the rewards for miners were reduced to 25 LTC from 50 LTC. The event of halving takes place every 4 years, after every 8,40,000 blocks for Bitcoin & Litecoin, which varies for other coins.
When is the next LTC Halving and what should we expect?
The expected date for the next LTC Halving is 5 August 2019 at block height 16,80,000.
A lot of analysis and speculations are doing the rounds on the internet that discuss the importance, impact, and results of LTC Halving, where a few people predict a price rally similar to its previous halving in 2015. But on the contrary, the founder of the blockchain based cryptocurrency in an interview said,
“When the mining rewards get cut in half, some miners will not be profitable and they will shut off their machine. If a big percentage does that, then blocks will slow down for some time. For litecoin it’s three and a half days before the next change, so possibly like seven days of slower blocks, and then after that, the difficulty will readjust and everything will be fine.”
After such a statement, there are two things that we can expect to see after halving;
- Traders can expect higher volatility during this period.
- Miners should expect to earn lower mining rewards post halving.
When we look back to the last halving that took place 4 years ago on 25 August 2015, we witness a peak in prices, then a reverse swing losing almost 50% in value by the time of the block rewards reduction and hitting a 75% in the halving aftermath.
Litecoin was trading at just below $78 earlier last month, and is now approaching towards $100. This blockchain based cryptocurrency also aces among the top 25 altcoins at rank number 4 according to market capitalization.
Currently trading at nearly $99, LTC marked an epic all time high of this year at $145.
The consequences leading to the halving of LTC chain will majorly affect the profitability of the miners which will be reduced to half, i.e., a miner will only receive half of what he is receiving now (from 25 LTC to 12.5 LTC). This might also create an impact on the number of miners mining LTC which is likely to go down, unlike the first halving where the miner count remained stable, without any considerable variation.
But how will the supply and demand theory make a presence here?
Before analyzing the halving and its impact according to the economic theory, let’s understand the perspective of Charlie Lee, and how he interrelates supply, demand and market sentiment,
“In terms of the price, the halving should be priced in because everyone knows about it since the beginning. But the thing is people kind of expect the price to go up. 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.”
The basic theory of supply and demand justifies that;
To understand the scenario better, let’s take a situational example where we will majorly focus on how the Litecoin Halving will impact the miners.
A miner mining Litecoin incurs an expenditure of say $5000 on mining cost every month and mines around 60 LTC (rewards) on average per month. Assuming the price of LTC to be at $100 we can conclude that $6000 is the revenue of the miner and he/she takes in a profit of $1000 per month.
So after the halving the same miner with his/her same mining rigs will only be able to generate 30 LTC (rewards) per month, which won’t be feasible to run the same operation. The Miner has 2 choices :
- To increase the mining/Hashing power of his rigs
- To sell LTC at a higher rate in the market.
Its is evident that no entrepreneur will invest a capital at one go and bare the cost of operations instead he will try to sell at a higher rate. Another technical scenario as per our analysis mentioned below, is that we see the prices of LTC drop after halving. In the latter condition miners should short LTC on futures’ contracts to gain profits if LTC prices take a downturn.
Technical Overview of LTC Halving 2015 and 2019:
Litecoin mining rewards are set to diminish by half on the 2nd week of August. As of now, miners get 25 LTC for mining each block of LTC. On 5 August 2019 and miners will be rewarded only 12.5 LTC per block. Last time the mining rewards were halved on LTC blockchain on 25th Aug 2019.
Exhibit 1: Daily Chart of LTC (May-Sep, 2015)
Exhibit 2: Daily Chart of LTC/USD (CMP: 97.70)
Early July 2015 had marked a significant top and prices by then were in a declining mode. However, that particular day also witnessed a large volatility that pushed prices even lower. It was in fact a continuation of the already- established intermediate downtrend. The incidence of 2015 Aug might be repeated and more sell order could flood the order book. In such a scenario, $80 will be a probable target for LTC.
Conclusion:
As I mentioned earlier in my blog, there are a lot of speculations and observations coming forth each day before the halving takes place. All we can currently do is to wait and observe how impacting the Litecoin Halving 2019 will be and what does it have in store for its investors and traders.
After a stable halving in 2015, with minimum or no loss of miners it is now time to witness how swiftly do miners handle the upcoming halving and of course the next halving 4 years later in 2023!
To keep a track of the Litecoin Halving, click here !
