We all have heard about Bitcoin Halving, and some of us are even probably counting down the days for it.
However, only a few crypto enthusiasts realize that other cryptocurrencies also exist that undergo similar halving events, giving their investors a golden opportunity to make a windfall of profit every few years. One such opportunity, Litecoin Halving, is coming in August. And since the last Litecoin Halving made LTC surge 1300% in the bull run of 2021, experts think this year's halving will also be raining profits for LTC investors in the long term.
But are they right to think so?
Let's find out in this blog.
What is Litecoin (LTC)?
Developed in 2011 by Charlie Lee, Litecoin (LTC) is a hard fork of the Bitcoin blockchain. It was inherited from the Bitcoin source code with a few crucial changes, like a faster block generation time and increased maximum coin supply to serve as a better mode of peer-to-peer payment than Bitcoin.
While the Bitcoin blockchain generates a new block every 10 minutes, Litecoin generates blocks every 2.5 minutes, four times faster than Bitcoin. This change makes the throughput of Litecoin transactions four times faster than Bitcoin’s. Both Bitcoin (BTC) and Litecoin (LTC) use the PoW (Proof of Work) consensus mechanism. The total number of Litecoins that can exist is 84 million (4 times more than the maximum number of Bitcoins).
Litecoin Halving
Since Litecoin (LTC) works on a PoW (Proof of Work) consensus mechanism, LTC miners race to solve a complex math puzzle using their computational power. They do so to win the right to mine a new block of valid transactions and earn a predetermined number of LTC as a Block reward. This block reward keeps reducing to 50% every four years.
At the time of the Litecoin launch, the LTC mining reward was 50 LTC. Over the past years, the Litecoin blockchain reduced this reward to 25 LTC in 2015 and further reduced it to 12.5 LTC in 2019.
The next LTC halving will occur on August 4, 2023, to reduce this mining reward from 12.5 LTC to 6.25 LTC.
It is crucial to mention that while Bitcoin block reward undergoes halving after every 2,10,000 blocks, Litecoin halving takes place after every 8,40,000 blocks. The 4x difference in the number of blocks is to compensate for the 4x faster block generation of Litecoin than Bitcoin. This arrangement keeps Bitcoin and Litecoin on a theoretically similar trajectory.
Litecoin halving occurs every four years on Litecoin Blockchain. This event was programmed into Litecoin during its creation and will continue till 2142.
The key reason behind such halving events is to keep a check on the supply of digital currency. Unlike conventional financial systems where authorities can print excessive money that causes inflation due to high supply, many cryptocurrencies undergo halving so that their supply keeps reducing. This setup maintains the demand for the cryptocurrency, which further encourages its price to surge in most cases.
Will The Litecoin Price Go Up After Halving?
The best way to know the answer to this question is to look at the past price performances of Litecoin before and post its halving. Historically, Litecoin witnessed significant price movements around its halving events. Let’s have a look at them one by one:
First Litecoin Halving
Litecoin encountered its first Halving event on August 25, 2015, halving its block reward from 50 BTC to 25 BTC. After nearly two years of this event, in 2017, LTC price pumped, making an almost vertical upward movement. This upward momentum continued throughout the year, boosting the price of LTC to over 8000% by the end of 2017. 1 LTC price rose from $3.9 to $353 in only a few months. However, one important thing to note is that almost the whole crypto market experienced a bullish phase in 2017. Thus, it is unknown if the halving solely contributed to the stellar rally of Litecoin in 2017 or if other market factors contributed too.
Second Litecoin Halving
The Second Litecoin Halving took place on August 5, 2019, reducing LTC mining reward from 25 LTC to 12.5 LTC. Post this halving also, LTC exhibited a noteworthy rally by rising over 1300% in only two years. Though this halving was weaker in magnitude compared to the rally post-first halving, it gave significant relief to LTC investors at that time.
Looking at these two Halving events of LTC, we can conclude that LTC has experienced a price increase after undergoing halving. However, halving was probably not the only reason behind these astronomical surges of Litecoin. The Overall market movement and macroeconomic factors also contributed to the highest price surges of Litecoin (LTC) so far. Thus, the performance of Litecoin after its upcoming halving is hard to predict. All the macro and micro factors associated with the crypto market together will decide the movement of Litecoin.
Is it a good time to buy Litecoin?
If we look at the current market conditions, Bitcoin Ordinals and BRC-20 tokens are all on the rage to be the next big thing on the Bitcoin blockchain. Their rapidly growing popularity is putting an immense burden on the Bitcoin blockchain, resulting in an overwhelming number of pending transactions. The increased workload further spikes the Bitcoin network fees, proving a problem for Bitcoin users. Multiple recent data reports show that due to the increased Bitcoin network fees, many investors started opting for alternative decentralized modes of payments, including Litecoin, Lightning network, and Dogecoin.
Due to this behaviour change, the Litecoin blockchain transactions recorded an all-time high. On May 8th, the Litecoin blockchain recorded more than 5,25,000 transactions in a day, which is five times the average number of transactions recorded by the Litecoin blockchain in the previous year. Thus, the rising popularity of Bitcoin ordinals and BRC-20 tokens can prove to be an unforeseen factor in the positive price movement of LTC. Moreover, halving that will reduce the number of new LTC coming into the market is just a few weeks away. Therefore, it would be safe to say that there exist factors that can open the door for the next bullish phase for LTC. But investors should be careful before investing in this coin and do their research before taking any flier on it.
Conclusion
Litecoin halving is one of the crucial events of this year. It will reduce the number of new Litecoins coming into the market, which can have positive effects on the Litecoin (LTC) price. However, if you want to make the most of this event, you need to understand the latest dynamics of Litecoin (LTC) in the market. The years after halving proved excellent for Litecoin historically, and most experts think the same will happen after this halving, too, the high volatility and bearish sentiments of the market have made it unpredictable to decide the exact trajectory of LTC after halving. Thus, it entirely depends on the investors and their risk appetite if they want to add Litecoin to their portfolio or not.
