Market Pullback, Halved Rewards for Miners, Is the LTC Halving the End or the Beginning?

The mining of the block 1,680,000 at 18:16 (UTC +8) on August 5 marked the second LTC halving was successful, slashing the block rewards for miners from 25 LTC to 12.5 LTC. On the day of halving, the price of LTC once surged to $106.63 with the biggest rise of 16.4% and fell gradually after the halving.

The first halving of LTC, which was born in 2011, took place on August 28, 2015. Six months before the second halving, the market trend was roughly the same as the first halving, price surge driven by the reduction in production was more concentrated in the first few months. From February to June this year, LTC rose from 32 US dollars to the highest $145.8, an increase of 355%, leading an upward movement of the market.

Views on LTC’s trend varies

In response to the impact of this LTC halving, many insiders have expressed their views:

Bullish:

1) Production cuts will change the market supply of Litecoin. Assuming the demand growth rate remains the same, the demand could be driven higher on the wave of hypes and FOMO. Once the supply growth rate declines, the price will rise in theory.

2) When the first halving happened in 2015, the cryptocurrency sphere was in the bear market. Four years later, public recognition and technological development have been completely different, the cryptocurrency sparked a market rally, therefore, the bullish trend was expectable after the halving.

3) Bitcoin’s production cut expectation may also bring in the market ahead of time, driving the LTC to continue to rise.

4) After LTC production reduction, the supply and demand greatly adjusted. Since the inflation rate has been reduced from 8% to 4%, miners and holders will be reluctant to sell, and thus, the market will remain a long-term and positive momentum.

Of course, some hold the opposite attitude:

1) The bullish has already cashed in. Looking at the halving in 2015, the market broke out three months ahead of schedule, and the unit price rose from $1.3 to the highest $8.96. Then the price fell and dropped to $2.95 on the day of the production cut. However, from the beginning of 2019, the price of LTC has increased five times. As the saying goes, “too much water drowned the miller”, therefore, bearish will follow the extreme bullish.

2) Investors who have enjoyed the earnings of this LTC halving will make a plan for the halving of BTC next year. According to the law of halving starts 3–6 months ahead of the scheduled time, it is expected that more funds will be gradually shifted from Litecoin and other digital currencies to bitcoin, which may cause the price decline of BTC.

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Short-Term Earnings after Halving is Depressing

Compared with the optimistic expectations of the secondary market, Litecoin’s production reduction will cause “injuries” to miners in the short term. “After halving, the overall income of the miners should be reduced by half, and the overall profit will be reduced to 10% to 30%. If the price does not rise, the mining earnings will become very pessimistic,” an industry source said.

The above-mentioned person pointed out that the current miners are mainly Antminer L3+ and L3++, of which the power consumption of L3+ is 800W, daily consumption is 19.2 kWh, and the total earnings is 0.008 LTC, equivalent to about 5.7 Yuan. If the electricity cost is 0.26 Yuan on average, it will account for more than 87% of the income. After halving the output, the mined LTC will basically cover the electricity cost. L3+ may “not worth a cent” because of the decline in energy efficiency.

In the face of possible adverse effect on the miners by halving, Li Qiwei said in the recent review that some miners may turn off the machines, but the difficulty of mining will be re-adjusted in a few days and everything will back to normal. Industry insiders also reminded investors who are interested in mining that the hashrate will have new changes after the halving, and direct purchasing of coins is a more secure option.

LTC Halving Make Way for BTC Halving

Charles Li, the previous Google engineer, created Litecoin eight years ago. In principle, the production mechanism of LTC is the same as that of Bitcoin, which was then dubbed the altcoin of BTC. Compared with Bitcoin, LTC has a shorter block generation time with an average of 2.5 minutes, and a higher total supply of 84 million.

Bitcoin vs. Litecoin

Litecoin has long been considered a “test-pillow” for Bitcoin, on which many innovative technologies are first deployed, whether being the isolation test or the lightning network, LTC always “take the lead”. Some people believe that this halving of Litecoin is a rehearsal of Bitcoin halving next year.

In short, due to the increasing correlation between digital currencies, the path of LTC and other cryptocurrencies depends a lot on Bitcoin.

Around May 20, 2020

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