Litecoin, one of the earliest Bitcoin clones, completed a process known as “halving” in early August, 2019, which means that miners stand to be rewarded with half of the tokens they were previously able to earn for their efforts verifying blockchain transactions.
What is Halving and How is Mining Affected
Blockchain networks that feature a finite number of tokens have a process whereby mining rewards are cut in half at set intervals. In essence, cryptocurrency mining operations consist of solving very difficult mathematical problems to confirm the integrity of transactions such as purchases or money transfers. New blocks must be created to accommodate information in the public ledger, and this occurs when miners submit proof-of-work algorithms, which in turn results in the rewarding of new tokens. Prior to the last halving event, Litecoin miners could expect to receive 50 tokens for their efforts; that amount has effectively been cut down 25.
Mining difficulty increases with each halving event because blockchain networks are being expanded. In terms of trading, halving events bring about a period of speculation and volatility because they generate headlines. In the case of Lite-coin, tokens have appreciated significantly since 2019, but this has mostly been related to an overall rally in the cryptocurrency markets. While the Lite coin halving was widely discussed on online forums dedicated to trading and mining of this token, its price has actually come down since then because analysts are uncertain about the role Litecoin will play in the future.
How Was the Market Affected by Litecoin’s Last Halving Event
When taking into consideration economic principles of supply and demand, the Litecoin halving should increase demand because tokens will be not be generated as quickly. Token prices should increase accordingly because there are not as many Litecoins entering circulation, but it should be noted that this is not a widely used cryptocurrency. The bottom line is that Litecoin mining is not as profitable as it used to be prior to the halving, and this will have an effect on the markets.
Discussion about blockchain halving tends to drive up cryptocurrency exchange prices, and analysts believe that this happened to Litecoin a few weeks ahead of the event. This kind of bandwagon trading can be unpredictable; in this particular case, many investors seem to have already collected their Litecoin profits and moved on, but others may be waiting for market apathy before taking short-term positions. Fundamental analysts are not very enthusiastic about Litecoin because this token does not seem to have what is known as “real circulation,” meaning that it is not widely used for retail payments or money transfers.