Litecoin Halving: Supply Reduction and Price Volatility

Analysts say Litecoin’s historic price rally from the halving has already occurred during this event.

Most people in the crypto community know that Bitcoin’s mining reward will be cut in half next year. However, few people realize that Litecoin’s own halving will occur earlier than Bitcoin’s.

In the Litecoin blockchain network, when a block is successfully mined, miners will receive a certain amount of Litecoin (LTC) as a reward. This reward was initially 50 LTC per block, but with every 840,000 LTC mined, the reward will be halved, approximately every four years.

Currently, the mining reward for each block is 12.5 LTC, but on Wednesday this week, this reward will be halved to 6.25 LTC.

Litecoin has a supply cap of 84 million LTC, similar to Bitcoin’s 210 million BTC supply cap, and about 87% of Litecoin is already in circulation.

Price trends are constantly changing

Matteo Greco, research analyst at Fineqia International, told Blockworks that Litecoin grew 824% in the months leading up to its 2015 halving and 525% in 2019, peaking seven weeks before the halving.

“The next halving is expected to take place in less than 24 hours, and if history repeats itself, this means that the 40% price rally that LTC showed at the end of June could be the highest price it can reach this mid-term,” Greco said.

Data from CoinGecko shows that LTC reached $113 on July 3, its highest price since April 2022.

As of 3 p.m. ET on Tuesday, Litecoin was trading at $93.10, up 4.3% from seven days ago and up about 0.5% over the past 24 hours.

“The Litecoin halving appears to be a ‘buy the rumor, sell the news’ event, with a large price increase in the first few months followed by a reversal of price action, indicating that the supply shock has been priced in,” CoinShares analyst Max Shannon told Blockworks.

Is there any impact on miners and other crypto tokens?

Greco said that as the reward for mining Litecoin decreases, miners' profits may be affected. However, when the hash rate drops, the mining difficulty will decrease, thereby reducing the mining cost, which will offset some of the impact.

BIT Mining chief economist Yang Youwei pointed out that the impact on miners' profitability may be further mitigated due to the dual mining mechanism of Litecoin and Dogecoin. He added that while Litecoin's block reward will be halved, Dogecoin's block reward will remain unchanged.

“All things considered, at this stage the halving will not have a significant impact on any of the components and is more of a narrative that investors and traders are using to create volatility and speculation,” Greco said.

Yang said that despite the current low volatility in the overall cryptocurrency market, LTC’s price has not seen large fluctuations compared to previous halvings. He added: “Due to its relatively small size compared to Bitcoin and its unique [proof-of-work]-based nature and specific mining algorithm, the Litecoin halving may not have a significant impact on Bitcoin or other altcoins.”

According to CoinWarz, Litecoin has a hash rate of 786 terahashes per second (TH/s), while Bitcoin has a hash rate of about 356 exahashes per second (EH/s).

Bitcoin was trading around $29,130 ​​on Tuesday afternoon, down 0.2% from the previous day.