Litecoin will halve in August. The last time it halved, it rose 5 times against the trend. How much can it rise this time?

Halving itself can bring about a single-digit increase, but it is a catalyst. If it is combined with other factors such as the increase in intrinsic value brought about by technological progress, large-scale capital inflows from mainstream financial institutions after compliance, and severe inflation, there will be a double- to triple-digit increase.

At the beginning of 2019, Litecoin has been leading the cryptocurrency market.

Since Charlie Lee announced at the end of January 2019 that Litecoin would be upgraded to support private transactions in 2019, coupled with the good news of the Litecoin block reward halving in August 2019, Litecoin has risen from $30 to around $61, and its price has doubled. Based on the price in mid-December 2018, the price of Litecoin has almost tripled.

A few positive lines changed people's views. Slogans such as the bear-bull turning point, buy Litecoin at will before the halving, and "Latiao 18,000" began to appear. Miners, investors, developers and other parties seem to be anticipating the upcoming Litecoin halving.

Will the halving really bring about a rally? How big will this rally be? Even if it does bring about a rally, how much of the increase will be retained after the halving?

Perhaps we can get some inspiration from historical halving situations.

Litecoin halving history

Litecoin is a digital currency cloned by Charlie Lee in 2011 by adjusting Bitcoin parameters. The main adjustments include algorithm, total currency and block time. Litecoin's mining algorithm was changed from Bitcoin's SHA256 to Scrypt. The total supply of Bitcoin is 21 million coins, and Litecoin has increased by 4 times to 84 million coins. Accordingly, Litecoin produces one block every 2.5 minutes on average, which is 4 times faster than Bitcoin. Bitcoin halves every 210,000 blocks, and Litecoin halves every 840,000 blocks, both halving every 4 years on average.

Because Litecoin was born three years later than Bitcoin, Litecoin halved one year before Bitcoin, but the number of halvings will be one less than Bitcoin. The first halving of Litecoin occurred on August 26, 2015, and the second halving is expected to occur in August 2019.

Let’s first look at the Litecoin halving in 2015.

2015 was the most difficult time of the last bear market. Bitcoin once fell below 1,000 RMB at the beginning of 2015. However, in the Litecoin market chart above, Litecoin had a small market in June and July 2015. Let's take a closer look.

At the end of May 2015, Litecoin started to rise all the way to the peak on July 10, from $1.45 to $8.47, and the price of Litecoin rose more than 5 times. The main increase was completed within a month. But then it fell, and on the day of the halving, the positive news was exhausted, and the price was recorded at $2.9. Although it was halved compared to the price on July 10, it was still twice the price before the start of the market.

It can be seen that Litecoin's real surge occurred in 2013 and 2017, following the rise of Bitcoin. It recorded huge increases even without halving.

Bitcoin halving history

In addition to the Litecoin halving market, you can also look at the impact of Bitcoin halving on its price.

Bitcoin has experienced two halvings. On November 28, 2012, the block reward was reduced from 50 BTC to 25 BTC, and on July 9, 2016, the block reward was reduced from 25 BTC to 12.5 BTC. The third halving is expected to occur at block height 630,000, which is approximately May 15, 2020.

On November 28, 2012, the Bitcoin block reward was halved from 50 BTC to 25 BTC. The price was $12.35 on the day of the halving, and six months after the halving, in May 2013, the price was $127, a 10-fold increase.

Nearly a year after the first Bitcoin halving, Bitcoin experienced its first major bull run known to the public. It rose from $120 in October 2013 to $1,147 on November 30, 2013, a 10-fold increase in price in less than two months.

On July 9, 2016, the Bitcoin block reward was halved from 25 BTC to 12.5 BTC. The price was about $450 six months before the halving, $657 on the day of the halving, and about $1,000 six months after the halving. One year after the halving, the price of Bitcoin was $2,500.

What else is affecting cryptocurrency prices?

Price is the result of the interaction between supply and demand. Therefore, in addition to the supply reduction factor of block rewards, there are many other factors that affect the demand for Bitcoin/Litecoin and thus their prices. At present, technological progress, central bank monetary policy, and regulation will significantly affect the price of cryptocurrencies.

1. Technological progress

Litecoin is not just a copycat of Bitcoin, but also a test field for new Bitcoin technologies. Segregated Witness and Lightning Network are all tested on Litecoin in advance. After dispelling people's doubts about the application of a certain technology on the Bitcoin network, it is deployed on Bitcoin.

2017 was the year of Bitcoin expansion. While Bitcoin developers and miners were still arguing about Segregated Witness, Litecoin activated Segregated Witness before Bitcoin on May 10, 2017. After people observed that Litecoin had no problems with Segregated Witness running for several months, Bitcoin launched Segregated Witness in August 2017. The same is true for the Lightning Network. The Lightning Network was enabled on the Litecoin mainnet in November 2017, and Bitcoin was not online until March 2018.

The Segregated Witness scaling method chosen by the Bitcoin community simultaneously meets the decentralization and scalability requirements of the Bitcoin network, while also removing obstacles to the deployment of the Lightning Network.

These technological advances have effectively increased the intrinsic value of Bitcoin and Litecoin, so their prices have been rising throughout 2017. It was not until the launch of regulated futures products in December 2017 that Bitcoin soared to nearly $20,000 per coin.

The current rise of Litecoin is not only due to the expectation of block halving, but also related to Litecoin's upcoming adoption of MimbleWimble technology. Charlie Lee said on Twitter that Litecoin will use MimbleWimble technology to achieve private transactions in 2019.

2. Central Bank Monetary Policy

The impact of monetary policy on cryptocurrency prices was most profound during the 2013 bull run.

During the European debt crisis in 2013, the government imposed a deposit tax on residents' bank deposits in response to the debt crisis. Bitcoin soared from more than US$30 to US$265 in just a few days.

In addition, the loose monetary policy adopted in 2009 to cope with the global economic crisis exploded in 2013. After the 2009 global economic crisis, the world's top two economies simultaneously implemented extremely loose monetary policies. China implemented a 4 trillion yuan policy, all of which was base currency. Three rounds of quantitative easing policies were launched in October 2008, November 2010 and September 2012. As of October 2014, the US QE program was completely stopped, with a total purchase of 4.5 trillion US dollars in assets.

By 2013, the excessive money supply in the previous few years had led to severe inflation, and hot money was flooding. People were looking to buy assets to preserve and increase their value, and Bitcoin’s anti-inflation characteristics fully met people’s needs. In addition, Bitcoin’s first halving in November 2012 led to a rise of more than 88 times in 2013, from $13 at the beginning of the year to $1,147.

In 2016, the Indian Prime Minister launched a campaign to abolish banknotes, but there were too few ways to exchange them. In order to prevent their wealth from being wiped out overnight, Indians bought Bitcoin to protect their wealth. In 2016, Brexit and Trump’s election as the US president also occurred. At the same time, the Federal Reserve began to raise interest rates and shrink its balance sheet. Many funds chose Bitcoin as a safe haven. Therefore, at the end of 2016, the price of Bitcoin reached 6,000 RMB, which doubled compared to the end of 2015, making it the best performing asset in 2016.

3. Regulatory policies

There are both unfavorable and favorable regulatory policies.

For example, in December 2013, the People's Bank of China and five other ministries issued a notice on preventing Bitcoin risks, and on September 4, 2017, the Cyberspace Administration of China, the Ministry of Industry and Information Technology and seven other ministries issued an announcement on preventing token issuance and financing risks. These regulations have seriously affected the market.

The most significant example of good regulation affecting the market is the launch of regulated Bitcoin futures in 2017. On December 1, the U.S. CFTC approved CBOE and CME to launch Bitcoin futures, and the two companies launched Bitcoin futures product trading services on December 11 and December 18, respectively. Good news is generally reflected in advance. In mid-November 2017, the price of Bitcoin was around US$7,000. On December 1, Bitcoin reached US$10,000. On December 11, Bitcoin soared to around US$15,000. On December 17, the price of Bitcoin reached an all-time high of more than US$19,000.

In August 2013, the German Ministry of Finance recognized Bitcoin as a legal payment method, enjoying the same status as legal currency, which also promoted the formation of the digital currency bull market in 2013.

Conclusion

From the historical market data, block halving usually brings a wave of market in advance, and the increase is uncertain. Litecoin rose by 5 times in the last halving, but eventually fell back to 2 times the original price. Bitcoin rose by more than 80 times after the halving in 2012. The halving of Bitcoin in 2016 only increased by less than 1 times, but it increased by dozens of times in 2017.

Perhaps we can summarize a historical experience: halving itself can bring about a single-digit increase, but it is a catalyst. If it is accompanied by other factors such as the increase in intrinsic value brought about by technological progress, large-scale capital inflows from mainstream financial institutions after compliance, and severe inflation, there will be a double- to triple-digit increase.

In other words, halving will bring about a wave of market conditions, but the real surge cannot rely solely on halving.

The second half of 2019 will be a wonderful time node. 1. Litecoin will complete the halving; 2. Bitcoin halving market warm-up begins; 3. Lightning Network is expected to penetrate into various products and services on a large scale; 4. The final results of the approval of ETF by the US SEC and Bakkt physical futures by the CFTC; 5. Financial giants invest in the game.

With the above factors, are you confident about the digital currency market in 2020?