Litecoin – After The Halving
The long-awaited Litecoin halving has finally come. Miners’ rewards have been cut in half, so the price should go up to encourage them to continue to maintain the blockchain. But how has the situation developed after all?
Last week, we gave you a short summary of an incoming halving. In a shortcut, this is a common practice in the cryptocurrency world, necessary to avoid inflation. Every cryptocurrency which is using a proof-of-work method needs to go through this procedure.
Litecoin had done so once before – and back in that day, it significantly increased its market value. With the second halving on the horizon, the interest of the audience about Litecoin has gradually increased. It resulted in a price increase a month before the incoming event.
Such growths might happen before some awaited events in the cryptocurrency industry. Growing attention around the cryptocurrency leads to increased investors’ activity. So, everything seemed to be moving in the right direction.
“Much Ado About Nothing”
Litecoin halving happened precisely when it had been planned – on 5 August. The reward for the successfully mined block has dropped to 12,5 Litecoin. In theory, the lower supply resulting from unprofitable mining should increase demand for coins. The fewer coins on the market, the more valuable there are – which drives up the price of the cryptocurrency.
At first, everything went exactly as it should be. The price started to go up. But when it reached the value of $100, it suddenly began to fall. Currently, the price oscillates around 90$ – so it looks like nothing spectacular has happened.
There is still a chance that supposed growth might happen. The lack of an assumed price increase may cause more miners to quit their routine. Further implementation of this process may finally encourage investors to allocate more funds to Litecoin. But this is a highly unlikely scenario. It looks like halving passed without any significant consequences.
Too high expectations?
One of the possible explanations of an unsuccessful growth lies in high expectations. Halvings are considered significant events in the cryptocurrency industry – but they don’t necessarily have to have any specific influence on the market situation. Such a conclusion comes from the Strix Leviathan researches, who published a report which states that the positive effects of halving are a myth.
Such a perception of the situation might result from past events. Two recent Bitcoin halvings have been associated with a major price increase. But it doesn’t mean that similar case will occur in every other one. There are plenty of possible factors that influence the overall market situation. If the halving happens in unfavorable conditions, it may not provide any significant change after all.
For example, Eric Turner of Messari, a blockchain analytics firm, point at the link between halving and a bear market situation. In the time of cryptocurrency drought, the market might overreact to such events, because investors see them as a chance for a change. But as Turner has noticed:
“Now that the halving is here, some investors are starting to exit the trade. Halvings tend to be priced in, so the event itself isn’t the positive catalyst that many expect.”
And last but not least, we should remember that the cryptocurrency market isn’t a mathematical equation – it depends on the human factor. In the time of the bear market, the uncertain promise of value growth associated with halving might not be reliable enough to encourage investors to spend their money.
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