What impact will the upcoming LTC halving have on the market?

01 Jun, 2019
by David Robb
Mining
What impact will the upcoming LTC halving have on the market?

Binance Research recently published its latest insights and analytics paper for the period March-May 2019. One of the main topics covered was the possible outcomes of the Litecoin (LTC) mining reward halving, which is due to happen around August 6.

The halving of Bitcoin mining rewards, due to happen in less than a year's time, is being discussed as a pivotal event for the crypto community, with a new mining paradigm having a potentially significant impact on the BTC price. The Litecoin (LTC) halving will be going ahead even sooner, and it could serve as a useful predictor for how the BTC market will evolve, as well as bringing in a new era for LTC itself.

Binance Research's report points out that mining rewards for Litecoin are more important, relative to transaction fees, than they are for Bitcoin. The lack of derivatives markets for LTC also means that spot prices are more important for profitability than for BTC.

Last time LTC's mining rewards were halved, in 2014, there was a major price rally of over 500 percent in the preceding months. The hash rate barely changed, but there was also a permanent drop in mining profitability.

A number of possible scenarios that could accompany the upcoming halving are outlined in the report. A gradual increase in hash rate in the months leading up to the halving could happen, as well as a price rally that would push profitability to previous highs. There could also be a form of self-adjustment mechanism, in which a lack of price rally would drive miners away, eventually leading to lower mining difficulty and subsequent rise in profitability. More straightforwardly, there may also be another permanent drop in the profitability of mining Litecoin. 

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