Saturday, 30 September 2023

Crypto News

Does Litecoin’s halving provide clues ahead of Bitcoin’s next April?

Litecoin price steadies as correlation with Bitcoin hits 0.88

Key Takeaways

  • The next Bitcoin halving is slated for April 2024, the fourth of Bitcoin’s existence
  • Litecoin has just undergone its fourth halving, but the price effects of Litecoin halvings in the past have not been as strong
  • Sample size is small meaning it is hard to conclude with confidence whether halvings have tangible price effects in the short-term
  • Bitcoin is a very different proposition to Litecoin, but the price action going forward of the latter will be interesting to track as we approach Bitcoin’s next halving in April 2024

Whether Bitcoin halvings are priced in has become a fervent topic of debate among the community. We put together an analysis of this question a few weeks ago, as we now fast approach the fourth halving of Bitcoin’s young life. 

Slated for April 2024, the halving will cut the Bitcoin block subsidy from 6.25 Bitcoins to 3.125 Bitcoins per block, halving the issuance rate of newly created supply.

We will not rehash (pun intended!) our aforementioned analysis of the upcoming halving here. Instead, we will focus on another coin: Litecoin. One of the world’s first altcoins, it is a derivative of Bitcoin and, intriguingly, just underwent the fourth halving of its life. 

Can Litecoin therefore be seen as a guinea pig ahead of Bitcoin’s own halving next year? Well, not really, but we may be able to gain certain insights. 

First, let us examine Litecoin’s performance through past halvings. Price data is quite illiquid prior to 2015, so the below chart omits the first halving. 

The log scale of the chart somewhat obscures it, but the second halving in 2015 preceded strong price performance for Litecoin. On the other hand, the third halving in 2019 saw falling prices, before the trend reversed after COVID struck in 2020, when the entire crypto sector surged into the mainstream. 

It is too soon to draw conclusions regarding the fourth halving, which occured just over a week ago on August 5th. Nevertheless, Litecoin’s halvings don’t offer compelling evidence of a strong relationship thus far at least. Furthermore, like most questions in crypto, the sample size is so small that even if they did precipitate aggressive price rises immediately, that would not necessarily mean there is causation.  

Bitcoin is not Litecoin, but again, we may be able to derive clues from the pattern in…

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