The Litecoin Network, birthed in 2011 as an offshoot of Bitcoin, is gearing up for its third mining-reward cut later this Wednesday. This halving, a mechanism that slices the per-block reward miners receive by 50%, is seen as a fundamental attribute of the two digital currencies. Reducing the release pace of the native token, LTC, the halving is laid out to occur approximately every four years.
Now, the hypothetical plot twist: Shouldn’t a restriction on supply lead to a surge in LTC prices post-halving? Interestingly, history doesn’t bear this assumption out. Following this change, the per-block LTC reward will plummet to 6.25 LTC from the hefty 12.5 it was set at approximately around 15:11 GMT (11:11 am ET) according to litecoinblockhalf.com.
Retrospectively, halvings have occurred on two other occasions: Aug. 5, 2019, and Aug. 25, 2015. Tracing the digital mark left by these events leads us to Charles Lee, the founder of Litecoin. Lee has maintained that these disinflationary cuts help to popularize the currency without compromising the security of the network.
But notably, Litecoin reacted to these halvings with less enthusiasm than one might expect. Following its inaugural halving in 2015, LTC traded at a stagnant $2.8 – $3.6 for nearly two years, with a breakout coinciding with Bitcoin’s rally in December 2017. The following halving in 2019 spawned a similar pattern.
A conceivable interpretation is that traders anticipated, and hence priced in the upcoming halvings. This resulted in generous pre-event rallies and was followed by a sell-off. Then came a period of seemingly endless fence-sitting as the market turned their eyes toward the next Bitcoin-driven bull run.
It’s important to highlight that both halvings were accompanied by Bitcoin, digital currency’s leading light by market cap, grappling with a brutal bear market. Furthermore, cryptocurrency bull markets invariably kick-off several months after Bitcoin’s reward halvings. The next one is anticipated in March or April of 2024.
As of writing this, LTC changed hands for $90.29, marking a year-to-date increase of 28.8%. Much like historical performances pre-halving, the cryptocurrency experienced a rally in the first half. However, whether history is to repeat itself remains an intriguing point of speculation.
Source: Coindesk
