Market Analysis

The Bitcoin and Litecoin halving: why you should invest now

If you are not familiar with halving, it refers to the time when the reward per block of a coin is reduced by exactly 50%. Bitcoin and Litecoin have their halving periods almost approaching, and the effect can already be felt. Litecoin is currently trading at highs of above $100 while Bitcoin continues to trade above the $10,000 mark.

Currently, there are 17,791,350 bitcoins in supply out of the total 21,000,000 that will ever exist. The cutting of its block reward into half occurs after every 210,000 blocks, which is after every four years. Bitcoin’s next halving will take place on the 20th of May 2020, and the reward per lock is expected to drop from 12.5 coins to 6.25 coins.

Litecoin’s halving is set to occur this August on the 5th, which is 34 days away. Unlike Bitcoin, Litecoin’s halves after 840,000 blocks have been released. This year, the reward will drop from 25 to 12.5 coins for every miner. 74.4% of Litecoin has already been mined representing 62,496,925 coins currently in distribution.

How exactly does halving affect the market?

In 2012 when BTC first underwent halving, the total market cap for altcoins increased from $45.89 million in June 2013 to around $2.02 billion in December the same year. During the second halving, the market cap for altcoins grew from $1.74 billion in 2016 to $555.91 billion in 2018. This shows the existence of a strong link between Bitcoin halving and the market prices for most cryptocurrencies.

Halving not only reduces the reward per block for the miners, but it also leads to a decrease in the supply of the coins. With the halving of both bitcoin and Litecoin almost approaching, most coin miners will give up the mining because of the lower rewards they will get after that. This reduces the number of coins being generated, which leads to scarcity, and according to the law of demand, the higher the demand, the higher the price.

For example, in the past when either of the coins halved, their prices grew exponentially. In 2012 when the first halving of bitcoin occurred, its price shot from $11 to around $1,100 the following year. The next time it halved in 2016 it saw the value go up from $230 to its all-time high of $20,000.

For Litecoin, its first halving saw its price from $1.12 in January 2015 to around $8.72. We therefore anticipate seeing it attain a higher value after the 5th of August from where it currently stands at $117.43. Bitcoin’s price currently stands at $10,264 according to Coinmarketcap, but with its halving coming up soon, market experts among them Ronnie Moas are optimistic that it may surpass its all-time high of $20,000.

It is, therefore without doubt that investing in either Bitcoin or Litecoin is a risk worth taking if you want to reap big. However, invest with caution keeping in mind that the cryptocurrency market is highly volatile, and anything can happen even after the halving.

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coinmag

Daniel is an experienced writer with a keen eye on emerging technologies. He aims at educating the crypto community on the developments within the space.

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