All-In-All it appears that, of the four possible scenarios postulated by Binance Research, the set of prediction theories that seem to be playing out have less of a doomsday tinge to them than the two that foresaw an exodus of hashing support for the network.
Instead, what currently seems to be playing out is the Positive Feedback Loop theory put forward by Marco Streng of Genesis Mining, in a conversation with Coindesk back in 2016. If a Positive Feedback Loop is in play, then the price rally that preceded Litecoin’s halving event is largely due to the influence miners, who are solely responsible for generating all newly-minted Litecoin, have on the market.
In theory, market demand for a digital asset rises prior to the halving event (the supply of tokens mined per block, gets cut in half after a predetermined number of blocks as a built-in deflationary measure) in anticipation of the decay in coin supply. This pushes up asset prices. Following the rally, miners – who now mint fewer coins – take advantage of market price and sell fewer coins to fund their operations. Which then affects market supply, leaving an opening for a post-halving rally.
Creator of Litecoin, Charlie Lee, was of the opinion that miners may exit the ecosystem following the rally, however, hash rate was chugging along at well above 400 T/h’s at time of writing.
“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.” – Charlie Lee in an intervew with Australian news portal, Mickey -July 2019
Contrary to his prediction a month ahead of the halving event, Litecoin’s hash rate remains high. Indicating continued mining support for the network. Lee took to twitter on August 5th, some 22 hours after the Litecoin halving had taken place and announced:
“504 blocks have been mined since the halving. This is 1/4 of the way to the next diff change. 21.65 hrs has elapsed since the halving. Normally on average it takes 21 hrs for 504 blocks. This means 97% of pre-halving hashrate still mining LTC.” – Lee
The shock hashing exodus event that coincided with Litecoin’s last halving event appears not to have taken place. Seeing as the section on halving events in the crypto textbook is still in draft, one can’t help but wonder if the phenomenon will be a factor in Litecoin’s next halving
In the 24 hours before the rally, the average price of Litecoin gained about 13% in value. Going from dawdling in the $80 – $90 price range, Litecoin gave an impressive showing, even going as far as crossing the $100 mark before settling in the mid-$90 range. Analyst postulated that most of the digital asset’s bullish energy was being syphoned from Bitcoin’s bullish attempt at retaking the $12,000 price point on it’s Moon campaign.
It’s red across the board at the time of writing, and Litecoin’s price is sitting at around $92. Litecoin may be either experiencing a temporary pullback prior to a bullish uptick, or is establishing a historical trend, as the last halving event was followed by a protracted dip in prices. Either way, chances are that the bullish momentum experienced by Bitcoin ahead of it’s 2020 halving event will likely buoy Litecoin prices to higher price levels.
Charlie Lees is of the sentiment that the market rallies that halving events are becoming known for, are more based on hype than they are on actual economic theory. He dismisses the phenomenon saying:
“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.”