- Litecoin price plunged to its August low of $85.78 in the aftermath of the block reward halving event, the opposite reaction of BTC halvings.
- While Litecoin and Bitcoin halvings are considered similar events, LTC price nosedived nearly 10% in response to the halving of the mining reward.
- As opposed to Bitcoin’s response to the BTC halving narrative, two consecutive Litecoin halvings have turned out to be ‘buy the rumor, sell the news’ events.
Litecoin (LTC), one of the largest altcoins in the crypto ecosystem, went through a halving event on August 2 in which the mining reward per block was slashed in half. Contrary to popular expectation, Litecoin price plummeted in response to the event, dropping to a fresh monthly low of $85.61.
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Litecoin price declined post LTC halving event
The Litecoin halving event was followed by a steep decline in LTC price on Binance. Litecoin dropped from its Wednesday high of $94.50 to its August low of $85.61. In the days leading up to the halving, there was a significant accumulation of LTC tokens by large wallet investors.
Interestingly, while whales engaged in profit-taking that drove LTC price lower post the event, the token went through a distribution phase. Investors holding less than 10 LTC tokens, scooped up more of the altcoin, while large wallet investors engaged in selling.
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Litecoin redistribution through the halving
Wallets holding less than 10 LTC and those with between 1,000 and 100,000 LTC tokens scooped up the Litecoin distributed by large wallet investors. In this manner, LTC was absorbed by demand among different segments of market participants, limiting the price drop under 10%.
While the halving is typically considered a bullish catalyst for Bitcoin and Litecoin, the narrative has changed for LTC over the past two halvings. Analysts at Santiment evaluated the previous LTC halving and the most recent one, concluding that the asset hit a peak weeks before the halving event and the mining reward slashing drove traders to “buy the news, sell the rumor” activity.
The halving event for Litecoin is, therefore, not a bullish catalyst, like it is for Bitcoin. This separates Litecoin from Bitcoin, despite several similarities between cycles and narratives of the two tokens.
At the time of writing, LTC price trades at $86.02, making its way to the psychological barrier of $90 that acted as key support for the altcoin throughout July.
Litecoin halving FAQs
Litecoin’s third block halving event is scheduled to take place at a block height of 2,520,000, which is estimated to happen around August 3. The current block height is 2,511,587. The first halving took place in 2015 after the block height was 840,000. The second Litecoin halving event occurred in 2019 when the total block height hit 1,680,000. This event takes place roughly once every four years.
Halving is an important event for both miners and investors. After halving, the block rewards are slashed in half, as the name suggests. The first halving event in 2015 reduced the block reward from 50 to 25 and the second one in 2019 halved it to 12.5. The third halving, which is scheduled on August 3, will further reduce it to 6.25. This means that miners will go from receiving 12.5 LTC for mining a block to 6.25 LTC after the third halving.
After a halving event, the emission of LTCs is cut in half, which effectively triggers a reduction in the Litecoin supply. If the demand remains more or less the same, it creates a negative supply shock. The same dynamics are seen if the demand for LTC increases. Due to the reduced supply and high demand, it would trigger a rally in Litecoin price. But traders often anticipate this trend and try to get an exposure to LTC before the halving, causing a premature rally and a sell-the-news drop on the day of the event.
Following a halving event, miners receive 50% fewer rewards for every block they mine and this creates scarcity in the altcoin, reducing the circulating supply of the asset. The event’s purpose is to control the inflation rate of Litecoin. Halving is therefore a key event that influences the asset’s price and market capitalization over time.
From a technical perspective, it is not any different. But from an investor and miner perspective, there are lot of differences. For example, the concept of halving remains the same for both assets, but due to relatively lower total supply of 21 million and first-mover advantage, Bitcoin’s network effect and large market capitalization as a result has a significant impact on the crypto ecosystem as compared to Litecoin. Additionally, the effect of halving events is more pronounced for Bitcoin, because of the asset’s dominance, hence BTC halving receives more attention.
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