9 Days Till Litecoin Halving - What is This And Why Should You Care?

By yourmitchy | CryptoTips | 26 Jul 2019

$2.84 tipped


A reduction in inflation is great in any market. Restricting the supply of an asset really does change the dynamics of the market over a longer period of time and this will be the same case for Litecoin when the block reward halves again in 9 days time.

What Is A Halving?

No, the Litecoin network is not splitting in half! What is actually happening is the reward that the miners receive for securing the network, currently set at 25 LTC per block, will reduce by a drastic 50% - hence the use of the halvening. This means that the influx of LTC currently entering the ecosystem will see a 50% reduction - 50% fewer coins are now entering the supply of the market as before. 

The Litecoin block halving is scheduled for block number 1,680,000 which is expected to be mined on August 5 2019. The block reward is set to be halved every 840,000 blocks and this is coded into the software from launch.

So What Happens During The Halving?

Well, opinions are greatly mixed on this topic. Many people believe that this should help the price rocket in the run up to the halving. However, other experienced players within the market actually believe that the value derived from the halving is actually already priced into the market. Why would it not be? We all knew about the halving ages ago as the block number has always been set.

The first block reward halving for Litecoin took place way back in 2015 at block 840,000 when the reward was cut from 50 LTC to 25 BTC. In the month before the halving was expected, Litecoin saw an epic price surge totalling 400% as it increased from around $1.70 to around $8.00. However, in the two months following the halving, the price of Litecion dumped by a total of 75%. 

IF we are to take a look at the LTCUSD market beneath, we can see why many Litecoin HODLers believe that the block halvening is already priced in.

Since the start of February this year, Litecoin has surged by a total of 194% from $46 to a high of $138 which is a very significant increase that can largely be attributed to early traders anticipating the block halving to have a positive effect on the price - even before the halving.

What Does Charlie Think About It All?

No not Charlie Chaplin! I'm talking about LTC founder and creator Charlie Lee.

Lee has aired some interesting concerns about the upcoming halvening as he believes that this may have a “shocking” impact on miners. In a recent interview, Lee had stated that he thinks that some miners will become unprofitable after the block halvening leading to these miners to shut off their machines. The blocks will start to slow down as a result of a number of miners turning off their machines as the network has less power. However, after the difficulty has readjusted (every 3.5 days) the block time should return back to its normal speed as equilibrium is reached again.

Regarding the price, Lee believes that the halving is already priced in as investors have always known about the halving. However, he also believes there may be some short term increases due to traders believing that the halving will still allow the price to increase causing them to buy, which causes the price to increase - a self-fulfilling prophecy.

Conclusion

At the end of the day, the 50% reduction in inflation will be a strong positive for all LTC holders. As the influx of LTC starts to become restricted on the market, this should lead to increased prices due to the new constraints. However, this is to be seen as a long term effect as the majority of traders will agree that LTC will dump after the halvening.


yourmitchy
yourmitchy

doge is no joke


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