Litecoin founder Charlie Lee predicts that next month’s halving will be a shock for LTC miners, leading some of them to shutter their enterprise for good.
Halving Will 'Shock' Litecoin Miners
In an interview with Australian crypto outlet Mickey published on July 10, Lee gave his opinion on litecon’s forthcoming halving. Estimated for August 5, the halving will cut litecoin’s mining reward from 25 to 12.5 LTC per block, greatly decreasing the profitability generated through mining coins.
According to Lee, the halving has historically been a “shock to the system” for Litecoin and its miners, as they sort out the new landscape of block rewards. Some miners will be forced to close their enterprise, leading to a short-term disruption in the LTC network.
“When the mining rewards get cut in half, some miners will not be profitable and they will shut off their machine. If a big percentage does that, then blocks will slow down for some time. For litecoin it’s three and a half days before the next change, so possibly like seven days of slower blocks, and then after that, the difficulty will readjust and everything will be fine.”
Litecoin has been one of the best performing cryptoassets in 2019, gaining more than 300% in value since the start of the year. Analysts attribute the price trend to anticipation for the halving, when the supply of coins is suddenly decreased. Miners are forced to sell their litecoin at a higher price to recoup electricity and operating costs, thereby driving the market value higher.
LTC Price a Self-Fulfilling Prophecy
Lee commented on the price psychology of a halving event, particularly that investors are being driven by a “self-fulfilling prophecy” of a price increase.
Litecoin’s founder believes the reward drop should already be represented in the valuation because investors know about the event well in advance. Current market prices are being driven by traders expecting others to continue buying litecoin, thereby driving the price higher,
Lee told Mickey,
“In terms of the price, the halvening should be priced in because everyone knows about it since the beginning. But the thing is people kind of expect the price to go up. So a lot of people are buying in because they expect the price to go up and that’s kind of a self-fulfilling prophecy. So, because they’re buying in, the price does actually go up.”
Litecoin’s last halving event occurred in August 2015. The coin jumped more than 450% in the months leading up to the reward drop before peaking in early July 2015. However, litecoin fell in the subsequent weeks and was trading at 50% of its earlier valuation by the start of the halving.