The halving was successful! Litecoin surged and then fell back. Where is the next opportunity for a 5-fold surge?

Text | Mao Gedong

At 6:18 pm on August 5, with the successful mining of block 1680000, Litecoin (LTC) successfully completed its second production reduction. Similar to the Bitcoin mechanism, Litecoin also undergoes a production reduction approximately every four years, with mining rewards being halved from 50 LTC until all Litecoins are mined. Currently, Litecoin mining rewards have been reduced from 25 LTC to 12.5 LTC.

Dramatic changes in Litecoin market before and after the reduction of production

As of the completion of the halving, the price of LTC was $104.48, an increase of about 13.6% in 24 hours. However, dramatic changes in the market occurred a few hours before and after the Litecoin halving - three hours before the halving, the price of LTC continued to rise, reaching a high of $106.8; as the halving was completed, the price of LTC continued to fall, and has now fallen below $100.

In contrast, the performance of other important currencies - before and after the Litecoin halving, BTC briefly broke through $11,800, but then fell back slightly to between $11,800 and $11,700; ETH rose slightly and successfully broke through $236 from below $230, but then fell back to around $230. Overall, the Litecoin halving did not bring about significant changes in the currency market.

According to the halving effect, theoretically, the halving of Litecoin production will lead to an imbalance between supply and demand, thereby driving up the price of LTC. However, this is not the case in reality.

This phenomenon is somewhat similar to the first production reduction of Litecoin.

On August 26, 2015, Litecoin conducted its first production cut. On May 22, the LTC market had already exploded. Data showed that the LTC price rose from $1.35 to $8.96, a 563% increase. After that, the LTC price fell, and on the day of the production cut, its price was $2.95.

In the second halving, the trend of LTC in the past six months was roughly the same as the first halving, and the price increase driven by the production reduction was more concentrated in the first few months. From February to June 2019, LTC rose from $32 per unit to a peak of $145.8. However, starting from the end of June, LTC's upward momentum weakened, and then it started a downward trend, falling all the way to around $78.

The reduction in production has not made miners give up Litecoin, they are still waiting and watching

“The halving will not have any actual impact on Litecoin. Some miners may choose to shut down their machines temporarily, but after about a week, when the difficulty is adjusted, they will turn on their machines again to mine.” Litecoin founder Charlie Lee is firmly optimistic about the halving.

Some people also believe that the halving of mining rewards will also reduce the inflation rate of Litecoin. After this halving, the inflation rate of Litecoin will drop from the original 8.94% to 4.26%.

In this regard, some mining machine manufacturers and miners expressed their opinions.

"It is almost impossible to make money from mining Litecoin now. The net profit of each L3+ mining machine for mining Litecoin per day is less than 5 yuan." Before the Litecoin halving, Litecoin mining machine manufacturer Chen Chuan told Mars Finance APP (ID: hxcj24h).

Some miners also said that second-hand mining machines are becoming less and less valuable, and the value of the Litecoin mined can only barely cover the electricity bill.

Seven hours before Litecoin’s halving, F2Pool co-founder Shenyu wrote on Weibo: “The L3+ with an electricity bill of 0.26 yuan can be turned off at night. ” The “L3+” mentioned by Shenyu is a mining machine launched by Bitmain in 2017, which belongs to the L3 series specifically used for mining Litecoin.

Although many miners are pessimistic about the Litecoin halving, it is interesting that with the successful halving of Litecoin and the increased difficulty of mining coins, there are not many second-hand Litecoin mining machines for sale in the market.

"In fact, the halving of Litecoin did not cause panic among miners. As far as I know, most people are still taking a wait-and-see attitude," said Chen Chuan.

Litecoin production reduction: a warm-up for Bitcoin's future production reduction?

"The reduction in Litecoin production will have a significant spillover effect on other currencies. Because of the definite economic characteristics of Litecoin production reduction, it will inevitably bring about a wave of production reduction." PZ, head of Litecoin China, told Mars Finance APP (ID: hxcj24h) , but at present, the spillover effect and production reduction on other currencies have not been reflected.

Some people also believe that the Litecoin halving is a preview of the Bitcoin halving next year. Litecoin and Bitcoin have always been considered to have a special relationship. Many innovative technologies are first tested on Litecoin and then deployed on the Bitcoin network. Whether it is testing Segregated Witness for Bitcoin or Lightning Network, Litecoin has always been the first to take the lead.

Therefore, Litecoin has always been regarded as the "testing ground" of Bitcoin, testing the waters and paving the way for its development.

Li Qiwei did not deny this statement. He pointed out, "Litecoin is a good alternative to Bitcoin. It has a strong network and has never been shut down. Litecoin has its own ASIC miner network, so it will not compete with Bitcoin for computing power. And Litecoin's transaction fees are very low. When the Bitcoin network is congested, Litecoin is a good way to transfer value. "

Finding a new story for Litecoin: Privacy and fungibility will be the next battleground

At the beginning of 2019, Charlie Lee announced a partnership with anonymous coin Beam to introduce Mimble/Wimble privacy protocols in Litecoin upgrades. Mimble/Wimble is a blockchain protocol focused on fungibility, scalability and privacy. It became more well-known at the beginning of this year due to the popularity of anonymous coins such as Grin.

If Litecoin successfully joins the Mimble/Wimble protocol to enhance its anonymity, it will greatly improve the privacy of Litecoin. Once Litecoin is successfully tested, it may also be deployed on Bitcoin in the future, bringing new price imagination. Therefore, after Charlie Lee announced this decision, the price of LTC once soared by more than 10%.

From another perspective, this seems to be another story that Charlie Lee is looking for after Litecoin’s halving. In the past six months, the halving story has caused Litecoin to rise from a low of less than $30 to a high of $146, a nearly five-fold increase in price. But with the halving completed, Litecoin needs a more imaginative story to attract investors to continue investing and maintain its market value.

Not surprisingly, Lee Qiwei has set his sights on the Mimble/Wimble protocol. In the latest interview, Lee Qiwei first admitted that the halving of Litecoin will affect its hash rate, which is consistent with the opinions of Litecoin miners. "Some miners may turn off their mining machines," Lee Qiwei said. But he then said, "In a few days, the mining difficulty will be adjusted and everything will return to normal."

Regarding the future of Litecoin, Charlie Lee revealed that the team is studying "Mimble/Wimble as a Litecoin extension block". He emphasized that Litecoin needs to be more fungible and private to "make money", and Mimble/wimble achieves privacy without sacrificing scalability. Finally, he unveiled the mystery of Litecoin's new story:

“Privacy and fungibility are going to be the next battleground.”