Analyzing Litecoin's Performance Pre-Halving vs. Post-Halving
By Noah Washington September 25, 2023
- Previous Litecoin halvings in 2015 and 2019 led price spikes; the first halving resulted in a steady price increase
- Contrary to previous trends, litecoin saw a price decrease post-August 2, 2022 halving, currently trading in the $60 range
- Litecoin's ultimate value might be driven by the strength of its blockchain, utility as a payment network and integration into decentralized finance
Crypto markets often see a predictable pattern around token halvings. Historically, halvings spark rallies as prices surge in anticipation and in response to newly scarce tokens entering circulation at a slower rate.
One of the top altcoins, Litecoin, demonstrated this trend around its August 2, 2022 halving. In the months beforehand, Litecoin prices climbed significantly. However, after the halving took effect, trading volumes and token values are flat compared to earlier in the year. Is litecoin experiencing a post-halving hangover?
Often a Self-Fulfilling Prophecy
Other cryptocurrencies like bitcoin have consistently experienced significant price rallies around scheduled halvings in past years. These pre-programmed network halvings reduce the supply of new coins introduced into circulation, making existing coins more scarce. Many investors anticipate and speculate on this growing scarcity ahead of time, betting that basic supply and demand economics will lead to higher prices after the halving occurs.
Recent and upcoming cryptocurrency halvings. Source: Changelly
The increased hype and speculation surrounding halvings often create a self-fulfilling prophecy - as more investors buy in hoping to profit from post-halving gains, increased demand actually helps drive prices higher. This was evident during bitcoin's previous two halvings in 2016 and 2020, after which its price went on to rally dramatically for months following the supply cut.
Litecoin's Pre-Halving Performance
The recent Litecoin halving in August 2023 marks only the third such event in the cryptocurrency's history since its launch in 2011. The previous two halvings came in August 2015 when block rewards dropped from 50 LTC to 25 LTC, and again in August 2019 when they fell further to 12.5 LTC.
Litecoin price and volume 2015-2016. Source: CoinGecko
Examining the price action around these prior events offers some useful context. In the six months leading up to each halving, litecoin tended to decline significantly as anticipation built. But it then saw major rallies both into and after the supply cut took effect. Litecoin surged over 820% in the six months prior to the 2015 halving. But once the halving finally occurred, prices slowly rose from the halving day into the next year.
Litecoin price and volume 2019-2020. Source: CoinGecko
Litecoin's performance after its 2019 halving repeated this pattern: A spike pre-halving, a dip post-halving then a steady rise. The muted price reaction post-2023 halving needs more time to determine if it's really diverged from historical trends. However, some analysts think it is still too early to determine the full impact of the latest halving given the dramatic post-halving rallies in past market cycles.
Litecoin's Post-Halving Performance
This most recent litecoin halving has followed an interesting trend. The months leading up to August 2 saw the token spike at several points, eventually peaking for the year so far at $113.23 on July 3, 2023. On the day of the halving itself, the token price had fallen to $93.82 per token, which was very surprising to many analysts who had predicted a surge. In the days following the halving, Litecoin has continued to fall in price. As of the writing of this article, the litecoin price hovers at the $60 level, a far cry from a steady uptrend - at least for now. .
Litecoin price and volume over the past year. Source: CoinGecko
Despite the disappointing price action immediately following Litecoin's recent halving, many investors retain optimism about its long-term prospects. Although the halving failed to catalyze an upward breakout as some had hoped, Litecoin's network usage has remained steady as measured by daily active addresses.
Overall Market Doldrums
While the crypto market currently appears disinterested in bidding up litecoin's price, some analysts believe prices will recover over time as the halving's impact is fully realized. Data indicates a few litecoin whales dumped significant holdings ahead of the halving event, likely contributing to the subsequent sell-off. But the halving has now decreased the supply of new Litecoin by 50%, a fundamentally supportive change.
Litecoin's halving schedule. Source: Coincodex
As the crypto markets mature, traders may pay less attention to short-term hype cycles surrounding events like halvings. Instead, litecoin's ultimate value might be driven by the strength of its blockchain, utility as a payment network and integration into decentralized finance. If Litecoin can continue building real-world usage, its price may disconnect from whales' dumping and instead reflect a solid long-term investment.
Fundamentals Still Strong
Beyond external market forces, Litecoin retains a dedicated community of investors and developers supporting its ongoing growth. This difficult post-halving period, rather than spelling doom, may end up being just a minor bump in the road. Litecoin still boasts a highly liquid market and strong brand recognition that positions it well for an eventual resurgence.
Litecoin also maintains useful differentiators like faster transaction speeds and lower fees that drove initial adoption. As the cryptocurrency industry matures, the crypto assets delivering real-world utility and use cases are likely to regain interest versus trading purely on speculation. Litecoin's longevity and network effects give it an advantage as investors re-focus on fundamentals.
While the short-term price action has been disappointing, litecoin still has promising fundamentals. Between external catalysts like a potential bitcoin bull run, its passionate community and its long-term utility, litecoin has the essentials to recover and remain an important cryptocurrency for years to come.