Explaining the Litecoin Halving – What You Should Know

 In Market News
bitcoin
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$
9,500.00
Price (BTC)
Ƀ1.00000000
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$
169 B
Volume
$
30 B
24h Change
0.17%
Total Supply
21,000,000.00 BTC

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212.13
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23 B
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13 B
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litecoin
Litecoin (LTC)
Rank: 4
$
90.98
Price (BTC)
Ƀ0.00957705
Marketcap
$
6 B
Volume
$
5 B
24h Change
8.87%
Total Supply
84,000,000.00 LTC

Explaining the Litecoin Halving – What You Should Know

Litecoin has been on a tear – to the tune of over 500% gains since LTC hit rock bottom at $20. Savvy investors spotted the opportunity when, during the bear market, LTC drove straight past record lows and posted incredible losses.

What is it exactly that those savvy investors saw in Litecoin? The answer isn’t a deeply held secret or insider trading information. Instead, the fundamental factor that made the difference is one known very publicly.

In 47 days, 18 hours, and 2 minutes, Litecoin will undergo what is known as the halving, an event hard-coded into the LTC algorithm in which block rewards are cut in half. What does it all mean? More specifically, how does it affect the price of

start-trading

Reducing Mining Rewards Makes LTC More Valuable

Just like Bitcoin, Litecoin reduces its block reward approximately every four years. The fact that it plays out over four years is purely incidental – the reward reduction is dictated by a specified amount of blocks mined rather than a specific amount of time.

This year, the Litecoin halving is falling on August 6th. When it happens, Litecoin block rewards will go from 25 LTC to 12.5 LTC. That also means the Litecoin Network will undergo a reduction of the annual inflation rate. To understand that last point, we’ll need to explain how block rewards increase the circulating supply of Litecoin.

New Litecoins are minted into circulation every time a miner successfully mines the block rewards from a new block. So, under the current setup, every time a miner unlocks their 25 LTC reward from the block, those 25 LTC are released into the circulating supply stream for the first time. That means there is a yearly inflation rate of 8.8%, but with the block reward reduction coming on August 6th, the inflation rate will be reduced to 4.26%.

To get a grasp on just how much LTC is poured into the circulating supply stream every day, consider that under the current mining reward settings, $1,937,330 worth of LTC hits the blockchain every day. Of course, that number is dictated by today’s prices, but given LTC’s bullish market structure, that value is likely to continue rising up to the halving.

The reason for Litecoin’s epic rise in price is simple – less LTC being minted on a daily basis means less supply. If there is less supply and a maintenance or increase on current demand, then LTC becomes more valuable. However, the halving hasn’t happened yet, so the current movement is all about speculation related to LTC value

Watch Out For the Pullback

Many traders have had a Litecoin position since the $20 price bottom during the bear market. With prices currently over $130, those traders are clear over 6x on their positions. Even traders who got in at $60 are well over double their initial investment.

Given the gargantuan gains of early traders, the odds that some of them will start locking in profits becomes greater with each passing day. For that reason alone, traders looking to open a position this late in the game should patiently wait for a pullback, rather than buying the very top of the halving price discovery cycle.

Explaining the Litecoin Halving – What You Should Know
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