The second reduction in the reward for mining Litecoin is expected for August 2019. A fall in prices is also expected, followed by stabilization, after the halving.
Litecoin (LTC) is preparing to experience, approximately on August 5th, its second reduction in the reward for mining since its creation in 2011. As part of the advanced effects of this event, known as “halving”, the prices of Litecoin in the market have been increasing in the last months.
This increase in the Litecoin price has almost reached 400% so far in 2019. Regarding this, the data provider, Coin Metrics, published on July 3rd a report highlighting that these price increases usually occur before a halving. This is because market players anticipate the impact of the reduction in sales pressure driven by mining, once their rewards have decreased by 50%.
It is observed that as the second reduction approaches half of the block rewards, LTC is one of the bets-performing assets in the current market cycle. The crypto asset went from being worth US $30, in early 2019, to reaching more than US $140 in July. The increase has been more significant since last April, coinciding with the beginning of the upward cycle experienced by the market this year. However, the growth of LTC has surpassed that of BTC and ETH.
A group of analysts consider that Litecoin has been one of the best-performing assets in the current market cycle, as it is approaching its second halving. LTC has grown 52% in the last year and is only 68% below its historical maximum.
Coin Metrics
The researchers add that something similar occurred during the first cut in the cryptocurrency’s mining reward in August 2015. They explain that by that time prices had hit the bottom seven months before the halving, and began to rise as it was approaching the reduction.
Then, prices fell sharply when the halving occurred, to recover slightly in the following months. However, the Coin Metrics team remembers the particular circumstances surrounding this first LTC halving:
Almost 9 million litecoins went through a single address, which represented approximately 22% of all existing Litecoin. There was widespread speculation that a Chinese Ponzi scheme was behind the address, but this has not been confirmed. Transactions from this address peaked in July 2015, the same month when Litecoin experienced a local peak of prices.
Similar Patterns
For the analysts, this market cycle pattern, which implies an increase in price before the halving and a fall in value after this event, has also been shown by other cryptocurrencies. Such is the case of Bitcoin and Ether, which have experienced two reductions in rewards throughout their history.
In this sense, they indicated that users must be optimistic regarding the cryptocurrency’s future appreciation, although the development of events must still be awaited in the case of LTC. However, they say that the cryptocurrency has followed the expected pattern until now.
Therefore, they predict that after the reduction in rewards next August, which will make miners receive 12.5 LTCs instead of 25, the sales pressure driven by mining will decrease and prices will fall. After that, the stabilization of the cryptocurrency’s value is likely to occur.
By Willmen Blanco
