What does Litecoin halving mean? When is the next Litecoin halving and how does halving affect the LTC price?
There are different approaches to limit the number of coins of a specific cryptocurrency. Ripple Labs has pre-mined all the coins that had to be released in circulation. Ethereum sets a specific number of coins for annual inflation. And some cryptocurrencies such as Bitcoin and Litecoin solve this issue using halving.
What Is Litecoin Halving?
Litecoin inherited the halving mechanism from Bitcoin. To understand what halving is and what it serves for, let’s check how new coins are created.
New LTC coins are created when miners add a new block to the Litecoin blockchain. When miners confirm a block, they get a specific number of coins as an award. The award consists of transaction fees and a fixed amount of LTC.
In the Litecoin blockchain, a new block is added approximately every 2.5 minutes. Every time when 840,000 blocks are mined, the award given to miners is halved. It happens approximately every four years. This event is pre-programmed in the Litecoin algorithm.
When the Litecoin project was launched, the award for mining a block was 50 LTC. Now, after two halvings, the block award is 12.5 LTC.
The Purpose Behind Litecoin Halving
The main purpose of Litecoin halving is to control the cryptocurrency supply. With every halving, a reward for block confirmation issued to miners is halved. The mining speed slows down, which reduces the number of coins in the circulating supply. Such a gradual reduction in the number of produced coins will take place until the reward for block confirmation will become lower than the smallest LTC fraction of 1/100-millionth.
Miners and Traders: the Impact of LTC Halving
The drop of block reward influences miners’ income directly. Firstly, miners start receiving 50% less income than they used to before halving. Further, the hashrate drops. So, mining becomes less profitable until the mining difficulty level is again adjusted to acceptable levels.
Mining brings positive results, too. With the drop of the circulating supply of the coin, demand for it is increasing. Thus, the LTC price grows. This price increase is also meant to compensate miners for the initial negative halving impact.
For traders, halving might also be beneficial. Miners work as efficiently as is possible in an effort to ensure profit before the award drops by 50%. More coins are mined, the supply increases, therefore, the price normally drops before halving. After halving, the price is expected to grow because fewer miners work to mine new coins. When the coin price stabilizes enough to compensate for the reward halving, the majority of miners return to the network.
With Litecoin, however, it seems that the standard scheme doesn’t work. It looks like halvings didn’t significantly influence the coin price.
Litecoin Halving Price History
Litecoin was launched in 2011. For now, just two LTC halvings occurred: the one in 2015 and the second one in 2019. The next LTC halving is expected to happen in 2023.
Pre-Halving Period
The coin price started growing in 2013, long before the first halving. In November 2013, the LTC market cap value crossed the mark of $1 billion. After that, the price started declining. The decline continued up to the very halving time in 2015.
Even after the first halving, the LTC price didn’t grow. The significant growth started being observed only in 2017 during the so-called cryptocurrency boom. One more factor that might have caused the LTC price growth is the activation of the SegWit protocol. On December 18, 2017, Litecoin reached its all-time-high price of $357 until the next price surge in May 2021 when the coin price managed to cross the mark of $370.
The second Litecoin halving took place on August 5, 2019. It reduced the mining award from 25 to 12.5 LTC per block. While many investors expected the halving to have a positive effect on the coin, it didn’t happen. Before the halving, on June 22, 2019, the bullish trend ended at the mark of 146.95$, and the coin continued to fall.
When Is the Next Litecoin Halving?
The next Litecoin halving will occur in 2023. It is normally expected that the coin price starts growing after halving. However, the practice shows that it is not always the case. In both previous cases, Litecoin halving didn’t have a significant impact on the coin price but the general trends in the crypto market had. So, it is a debatable issue whether halving impacts the coin price or not.
Litecoin Price Prediction After Halving
It is difficult to tell whether the coin price is going to grow after halving. The price movement is determined by supply and demand. And they, in turn, are influenced by many factors besides halving. From the previous halvings’ history, we can conclude that halving isn’t going to influence the coin price significantly.
Conclusion
Litecoin halving is an important mechanism that regulates the coin supply. It intends to create more demand and prevent coin devaluation. For now, just two LTC halvings occurred, and none of them made the LTC price skyrocket.