Litecoin halving didn’t prove fruitful for the 6th largest Cryptocurrency
Litecoin Block rewards halving has seen the mining interest plummet, Will Bitcoin Halving in 2020 suffer the same fate?
Let me start off by explaining the process of halving in Cryptos like Bitcoin and Litecoin for people who don’t know. It involves reducing the mining rewards to half, thus maintaining the limited supply of the cryptocurrencies. The supply in the case of Bitcoin is 21 million, while for Litecoin it is 84 million.
The reason for this halving is two-fold — to prolong the life of the network & keeping the value intact by controlling the supply of the coins. The last two Bitcoin halving events proved bullish for the premier crypto recorded massive gains a year before & after the reward split.
Will it happen again as we anticipate the third halving in May 2020 is something time will tell, but it has been a big bummer for the Litecoin halving that happened in August of this year. The hash rate for the sixth largest crypto by market cap dropped by almost 70% from 523 TH/S to 150 TH/S at the time of writing (chart below).
As the mining rewards dropped from 25 LTC to 12.5 LTC per block, crypto miners’ interest plummeted in Litecoin as they moved their ASIC mining hardware to more profitable operations. Although the inflation rate in LTC has dropped due to the halving that occurs every 840,000 blocks so has the price.
Some analysts believe that halving events are generally bullish events for the underlying cryptos, especially with the example of the previous two havings in Bitcoin. They also suggest that investors are reminded of the scarcity of the crypto coins pushing the demand higher with the associated cut in supply via halving.
Most of Alt. coins, on the other hand, have shown strong bearish momentum in prices after the summer peak on the heels of massive gains in BTC. So the analysts’ theory of scarcity driven demand in cryptos due to halving didn’t pane out… at least not this time.
While the miners have curtailed their operations significantly as you can see from the massive drop in hash rate, the demand from the investors and/or traders has been dropping as well. At the time of publishing, the hash rate in LTC is at its lowest level in 12 months. Keep in mind though, that last time the hash rate was this low, the price of LTC was over $300.
It seems to me, halving is not the only dynamic playing out here. More importantly, what does this mean for the much anticipated BTC halving in sometime in May 2020?
Although Bitcoin has a much higher demand than Litecoin, the major correction that the broader Crypto market has seen in the latter half of 2019 does not bode well for the expectations of Bitcoin rebounding on the halving event alone. There will need to be some fundamental shift in underlying sentiment.
Still bullish on Bitcoin for the long term, just not putting all my hopes in the BTC halving event to do that.