And with the blink of an eye, another four years in Litecoin’s lifetime are almost behind us. In 2023, Litecoin will be experiencing its third halving event, undergoing a 50% reduction in the amount of newly minted Litecoins. At the moment, 12.5 Litecoins are issued every 2.5 minutes, on average. After the halving, the 12.5 will be reduced to 6.25 Litecoins. This is a historic event that will occur every 4 years until eventually, there are no more Litecoins left to mine. This feature is engrained into Litecoin’s code — in another sense, it is Litecoin’s monetary policy.
The halving may present itself as a breath of fresh air to investors, many of whom have been affected by unreliable and inconsistent monetary policies in their home countries. In particular, countries such as Argentina, Turkey and Lebanon (to name a few), whose local currencies have become greatly devalued and purchasing power diminished. Historically, human error has been one of the greatest contributors to the collapse of currencies. Most, if not at all, countries have established a sticky collaboration between their local politics and large national banks, influencing decisions that for example, might be in the best interest of a ruling party in a specific moment, but likely isn’t the best long-term economic decision.
Unfortunately, acts such as these occur quite frequently (and often, in private). Imagine a president wanting to boost the economy before his next re-election, only for that decision be one that brings long term consequences to the local currency. This has occurred throughout history and has worsened after the separation of money from physical backings such as gold, allowing for a more easily manipulated currency. For example, the creation of more money (say, to fund a war), leads to an increase in the supply of it, often resulting in its devaluation and as a result, that money not buying you the same amount of real world goods and services you were previously able to (goodbye $5 Subway foot longs!).
With the innovation of Bitcoin and Litecoin, the opportunity to create an open-source, openly analyzable, and hardened form of money arrived. The four year halving is essentially a demonstration that there is in fact a way to have a consistent and transparent monetary policy. Not to mention, one that over time becomes less inflationary and as a result, more difficult for miners to obtain. Imagine gold and silver deposits around the world becoming depleted by 50% every 4 years, if demand for these persist or even increase, an upwards pressure on their price will occur.
Historically, in regards to market action, the Litecoin halving has seemed to contribute to two notable events — one, a surge in price leading up to it, and two, a crypto bull market that ensues the years following it, leading into Bitcoin’s halving. History does not always repeat, but studying it may help establish a clearer path towards the future.
Tradingview.com — LTC/USD
As indicated in the image above, the smiley faces show when the Litecoin halvings took place. Leading up to the halvings, a notable increase in the U.S. dollar price of Litecoin occurred.
Tradingview.com — LTC/BTC ratio
This chart represents the Litecoin/Bitcoin ratio and again, the smiley faces representing the date of the halvings. In a similar fashion, Litecoin made significant gains against Bitcoin leading up to to these events.
Tradingview.com — Crypto Total Market Cap
This chart represents how a crypto bull market has occurred following Litecoin’s halving events, analyzing the total crypto market cap.
Tradingview.com — LTC/BTC ratio
It’s also interesting to note that Litecoin has been in a multi-year wedge vs. Bitcoin, with an upwards breakout occurring on the ratio leading up to each of its previous halvings. The wedge appears to be getting much tighter, which brings the question, what will occur now that the triangle is coming to a close?
Bitinfocharts.com — Litecoin Hashrate
On another note, Litecoin has already undergone two halving events — one in 2015 and the second in 2019. It’s interesting to note that although block rewards have already been cut in half twice, miners have continued contributing hashrate to the network. Just a few weeks ago, Litecoin broke its all-time-high hashrate, meaning, the Litecoin network is the most secure it’s ever been.
Throughout uncertain global economic times, it’s impossible to say what will happen next, but at the moment, one thing is definite — Litecoin’s halving schedule is set in stone and it will immediately become more difficult obtaining new Litecoins after ’23. At the moment, approximately 71.5 million Litecoins out of the total 84 million have already been mined (about 85% of the total supply), with the remaining 15% being distributed at a slower rate over the following decades.
The 3rd halving is estimated to take place around August 2023, but we’ll have a better idea as we approach the new year. This event will continue repeating every 4 years throughout our lifetime and if you’re here, you’re at the inception of this multi-decade process.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.