One of the most compelling things about many cryptocurrencies is that they were built to be deflationary. For example, there will only ever be 84 million Litecoin, and of those, 74% have already been mined. Unlike the US Dollar or other fiat currencies, someone can't simply turn the printer on and create more. When all 84 million tokens are mined, that's it.
Another thing that keeps assets like Litecoin deflationary is halving. Halving happens multiple times throughout a crypto asset's life cycle, and it reduces the rewards for miners by half.
A Halving in Sight
On August 6, Litecoin will halve for the second time when the 1,680,000 block is mined, decreasing block rewards for miners from 25 to 12.5 coins.
The halving symbolizes the growing scarcity of the cryptocurrency, and it will reduce the inflation rate of the token from 8.74 percent to 4.36 percent per year. For this reason, it's considered a bullish event.
Leading up to its last halving in 2015, Litecoin gained more than 200%, only to correct in the final weeks before the event. This time around, it's following a very similar pattern. LTC was up more than 300% YTD in late June, hitting a high of roughly $141. In the early days of July, LTC free fell below $100 and is currently trading at $93.50.
LTC 12/31/14 - 8/24/15 (Halving)
LTC 12/31/18- 7/19/19 (Two weeks before halving)
It's unclear if Litecoin has reached its halving highs or not, but recently, its price seems to most closely tied to the Ole' Mighty Bitcoin.
Luckily, Bitcoin's third halving is on the horizon. In May 2020, Bitcoin's mining reward will drop from 12.5 to 6.25.
Historically, each halving event has resulted in significant price increases for BTC and the rest of the crypto market. In the year following the first halving, Bitcoin gained nearly 8,000%. Four years later, the second halving helped catapult BTC's most recent run to $20,000.
As fiat currencies around the globe struggle with inflation, Bitcoin, and other deflationary crypto assets are likely to become more attractive to investors. Alyse Killeen, the managing partner of StillMark Capital, told Bloomberg that we're approaching a "supply shock" where the demand for Bitcoin could potentially be greater than the supply.
So, if you missed the run-up to Litecoin's halving, you may still be in luck in 2020.
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