If you’re holding litecoin (LTC), you may be aware that its halving event is about to happen in a few days time. A halving is a rule embedded in litecoin’s code, and it reduces the rewards for the miners that ensure transactions are processed.
A halving aims to preserve a cryptocurrency’s purchasing power. So, for example, the mining reward is currently set at 25 litecoins ($2,500) per block, but will drop to 12.5 litecoins ($1,200) per block on 5th August. It also means that after that date there will be significantly fewer litecoins added to the market.
Coindesk compares it “to interest rate hikes and other measures initiated by central banks across the globe when combating high inflation, so investors may feel tempted to snap up litecoins while heading into the event.”
But, be warned, while we may see some price gains for LTC over the next few days they are unlikely to be massive, because the price action of the last six months suggests that an impending supply cut has already been priced in by savvy traders.
LTC did very well at the beginning of 2019 and in the first three months outperformed the leading cryptocurrency. As Coindesk says, “Essentially, LTC broke into a bull market well before bitcoin confirmed a bearish-to-bullish trend change with a big move above key resistance at $4,236 on April 2. Prices went on to hit highs above $140 in June before falling back to $80 earlier this month.”
Coindesk added, “If history is a guide, then LTC may trade in a sideways manner post next week’s reward halving, unless BTC makes a move toward the record high of $20,000.”
There is also the possibility that miners may move to another blockchain and that will lead to a drop in the hashrate. But it is worth noting that the hashrate dropped by 15 percent around the previous halving before rebounding in the next two weeks, according to Binance Research.