In a process known as “halving”, the mining rewards given out on the Litecoin network are reduced by 50% approximately every 4 years. This lowers the inflation rate by decreasing the supply of new Litecoin created. According to economic principles, cutting the supply growth rate, while keeping other factors equal, should increase the value per Litecoin. The goal is to drive up the price through this controlled supply scarcity mechanism.
Similar to gold, the idea behind Litecoin is that its supply will gradually decrease over time as fewer new coins are issued, making existing coins scarcer and more valuable. However, in the 24 hours since Litecoin’s recent “halving” event which decreased its issuance rate, the price of LTC has actually dropped 3.8% to $89.02, as per CoinGecko. Contrary to expectations, the halving does not yet appear to have had a positive effect on Litecoin’s trading price.
Litecoin is a cryptocurrency created in 2011 by former Google employee Charlie Lee as a modified fork of the Bitcoin codebase. Lee’s goal was to make a faster and less expensive version of Bitcoin. In the 7 days leading up to Litecoin’s recent halving event, its price dropped 0.6%, indicating lackluster performance even before the supply change. As a Bitcoin fork, Litecoin shares much of the original Bitcoin code but with some alterations to improve transaction speeds and reduce fees. Despite being designed as an enhanced Bitcoin alternative, Litecoin has failed to rally in anticipation of or following its third halving.
Litecoin was created to be a faster, less expensive peer-to-peer digital currency compared to Bitcoin. However, it has not surpassed Bitcoin in adoption. Recently, Litecoin made a minor resurgence when EDX Markets, a new cryptocurrency exchange targeting institutional investors, listed LTC along with other major coins like Bitcoin. LTC was added because it is less likely to face regulatory issues. This listing briefly boosted Litecoin’s price and restored its spot in the top 10 cryptocurrencies by market capitalization. But LTC has since declined again, falling back to 12th place. While the EDX Markets listing gave Litecoin a temporary comeback, it has so far failed to beat Bitcoin or sustain major adoption.
