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Goodbye Bear Market, Hello Litecoin Halving Countdown!
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What is Litecoin?
Origin
Litecoin was founded in 2011. Derived from Bitcoin, Litecoin's development team made specific modifications to the original Bitcoin source code. This innovation enables Litecoin to be used in certain restricted BTC networks.
Fast Transactions
Compared to Bitcoin, Litecoin offers faster transaction speeds and shorter block confirmation times. Typically, when a Bitcoin transaction is made, it takes about 10 minutes for a block to be confirmed. However, on the Litecoin network, a block requires only 2.5 minutes for confirmation.
Fair Mining
Litecoin and Bitcoin utilize different mining algorithms. Litecoin uses the Scrypt hash function, while Bitcoin uses the SHA-256 hash function. The simplicity of the SHA-256 algorithm has led to the dominance of GPU miners, FPGA miners, and ASIC miners in the Bitcoin domain. Mining farms and mining pools have completely monopolized the Bitcoin mining field, making it difficult for individual users to mine Bitcoin.
Charlie Lee, the founder of Litecoin, believes that the centralized mining behavior of Bitcoin is unfair to individual users. This could potentially allow certain organizations or institutions to control the entire Bitcoin network using inexpensive hardware, contradicting the decentralized nature of Bitcoin's original intention. Therefore, he introduced the Scrypt algorithm in Litecoin. With the implementation of the Scrypt algorithm, mining requires significant CPU performance and a large amount of memory space. This greatly increases the cost of mining, making it difficult for mining farms and pools to mine Litecoin cheaply. As a result, Litecoin is considered fairer than Bitcoin.
Currency Supply
Both Bitcoin and Litecoin have a limited circulating supply. The available supply of Bitcoin is 21 million, while the available supply of Litecoin is 84 million, which is more than four times that of Bitcoin.
What is Litecoin Halving?
Definition
Like Bitcoin, Litecoin also undergoes a halving event every four years. The term "halving" refers to the reduction of mining rewards by half. This means that after each halving, miners will receive fewer coins for the same amount of mining. Both Bitcoin and Litecoin have a halving cycle of approximately four years, which means that approximately every four years, the mining rewards are reduced by half.
Deflationary Mode
Halving belongs to what is called a deflationary mode. Deflation refers to a situation where the total supply of a particular currency remains constant while the issuance decreases over time. In the contemporary banking and financial systems, most governments adopt an inflationary mode where the currency supply keeps increasing. With more currency circulating in the market, the value of a specific commodity tends to decrease. You may have experienced this in daily life, where the price of an item that used to cost a few cents when you were young now requires several dollars. However, Bitcoin adopts a deflationary mode with a fixed total supply of 21 million and halving occurring every four years. Litecoin, like Bitcoin, also adopts this deflationary mode with a fixed total supply of 84 million and halving every four years. The advantage of the deflationary mode is that it helps control the total supply of a currency and, over time, increases the scarcity of that currency. Based on the simple principles of supply and demand, scarce items tend to be more valuable, and their prices naturally increase.
Previous Litecoin Halvings
Halving #1
(Source: CoinMarketCap)
- The first halving of Litecoin occurred on August 25, 2015, when the block reward for Litecoin was reduced from 50 LTC to 25 LTC.
- Prior to this halving event, there was a notable increase in trading volume and price. However, following the occurrence of the halving event, the market experienced weakness, resulting in significant price volatility. After the market heat settled, Litecoin's price entered a prolonged phase of fluctuating upward movement.
Halving #2
(Source: CoinMarketCap)
- Four years later, after 840,000 blocks were coded in the network system, the second halving occurred on August 5, 2019. This event reduced the miners' reward from 25 LTC to 12.5 LTC, which is the current reward amount for miners today.
- Similar to the halving event four years prior, this halving event served as a focal point, attracting a large number of investors to hold Litecoin before its occurrence. After the event concluded, the price of Litecoin returned to at least the level six months prior. However, the trading volume of Litecoin remained active. At the beginning of the following year (2021), Litecoin experienced a sharp increase, surging over 200%, reaching a peak of over $320.
Halving #3
(Source: CoinMarketCap)
- Litecoin will experience its third halving on August 2, 2023.
- Due to the halving effect, Litecoin's price performed well during the first and second halvings, which sparked significant interest from investors. As a result, more and more investors are paying attention to the upcoming third halving.
- In the less than one-month period leading up to the third halving, Litecoin's price has shown a slow downward adjustment. However, there has been a gradual price recovery and an increase in trading volume in the past day.
Summary
- With the development of the cryptocurrency market, many investors and institutions have started paying attention to the long-term potential of cryptocurrencies. These capital inflows have had an impact on halving events, increasing speculation and attention towards cryptocurrencies and shaping participants' expectations. Therefore, it is common to see halving narratives affecting the market.
- However, the impact of the Litecoin halving event on market value should not be regarded as an absolute rule, as there are many factors contributing to price fluctuations. It can be said that the halving is a necessary condition for its price, but not the only consideration.
- The cryptocurrency market carries risks, and investments should be approached with caution. We encourage MEXCers to learn about trading thoroughly and make investment decisions based on their risk preferences and risk tolerance. It is important to follow the principle of "Buyer Beware" and engage in rational investments while enjoying trading.