The entire crypto world is closely watching the cryptocurrency ahead of the halving of Litecoin rewards on August 5. Even for those investors who are not interested in Litecoin, the LTC halving makes sense, as Bitcoin will also have a reward halving in mid-2020. Now that the Litecoin halving is history, does it offer any lessons for investors looking forward to the Bitcoin reward halving?
This is worth thinking about because the halving pattern is the same for both networks. For Litecoin and Bitcoin, the block reward given to miners is halved after reaching a certain block height (for Litecoin, the miner reward is halved every 840,000 blocks are produced; For Bitcoin, the reward is halved every 210,000 blocks). While this is a regular event, it rarely happens — Bitcoin’s last reward halving occurred in mid-2016, while Litecoin’s was in mid-2015. The crypto market has changed quite a bit since 2016, so there is reason to believe that the 2019 Litecoin halving may provide the Bitcoin network better than looking back at what happened before and after the last Bitcoin reward halving of reference.
So what happened to Litecoin? Litecoin price spiked just before the halving, but has mostly fallen since then. According to Coinbase, the Litecoin price surpassed a high of $102 on the day of the reward halving on August 5, but is currently trading at around $74. While this drop may sound exaggerated, it probably doesn’t make much sense: Bitcoin, Ethereum, and many other tokens have all seen similar price movements, first hitting their monthly highs around Aug. 5, and then Dropped sharply to a fairly low level (as of this writing). The price of Litecoin just seems to be following the movement of the entire market.
If price doesn’t tell us much, what about important on-chain metrics for the Litecoin network? Has Litecoin network adoption increased or decreased? Looking at these indicators may be far more rewarding than trying to predict price movements that may not even be related to the halving event.
Since the Litecoin reward halving, the median weekly transaction fee has fallen by 22%, roughly in line with its market cap loss. Weekly trading volumes have also dropped by around 5% since the halving. But not all metrics have fallen. The weekly adjusted volume has increased by 21%, which means that more money has been circulating on the Litecoin network since the halving. Additionally, weekly active addresses also increased by about 35%, although most of the increase came from a spike in network activity around August 10.
Overall, the Litecoin reward halving sent mixed signals. Both bulls and bears will find meaningful metrics to back up their thesis, but the reality is that Litecoin’s 2019 reward halving doesn’t necessarily provide much reference for Bitcoin’s 2020 reward halving.
If there’s any lesson in this, it’s this: Despite all the speculation in the months leading up to the halving, Litecoin usage hasn’t changed much. The drop in price may have been more influenced by the entire crypto market than any halving-related factor. And the fundamentals of the Litecoin network have not actually been affected in any way.
As for Bitcoin’s 2020 reward halving, we can expect the price to fluctuate in line with the overall market trend and other network metrics. However, Litecoin’s experience shows that Bitcoin’s performance during the reward halving period will probably not be too turbulent.