What Litecoin’s Halving Might Suggest for BitcoinBy Andy Hao
The cryptocurrency world has watched Litecoin closely in the run-up to its August 5 halving event. Even for investors who aren’t interested in Litecoin, the LTC halving was of interest, because Bitcoin has its own halving coming up in mid 2020. Now that the Litecoin halving is in the rearview mirror, does it offer any lessons for Bitcoin investors anticipating next year’s halving event?
It's worth considering, because halving works the same way on both networks. For both Litecoin and Bitcoin, the block rewards granted to miners are cut in half after a certain number of blocks (for Litecoin it’s every 840,000 blocks and for Bitcoin it’s every 210,000 blocks). Although it’s a regular event, it occurs infrequently — Bitcoin’s last halving was in mid-2016, Litecoin’s was in mid-2015. Crypto markets have changed rather dramatically since 2016, so there’s reason to believe that Litecoin’s 2019 halving might be a better predictor for Bitcoin than looking at what happened before and after Bitcoin’s previous halving.
So what has happened to Litecoin? Prices shot up prior to the halving, but have mostly been dropping since. Going by Coinbase prices, Litecoin hit a high of more than $102 on August 5, halving day, but it’s now trading around $74. While that drop sounds dramatic, it may not mean much: Bitcoin, Ethereum, and many other tokens have all seen prices follow a similar pattern of monthly highs around August 5 leading to drops and significantly lower prices as of this writing. Litecoin’s price seems to just be following the broader market trend.
If we can’t tell much from price, what about important on-chain metrics for the Litecoin network? Has there been an increase or decrease in Litecoin network usage? Looking at these metrics may be more meaningful than trying to read the tea leaves of price movements that may or may not even be related to the halving event.
Since Litecoin’s halving, weekly median transaction fees are down 22%, roughly in-line with its market cap losses. Weekly transactions are also down roughly 5% since the halving. But not all metrics are down. Weekly adjusted transaction volume is up 21%, which means that more money is being transferred on the Litecoin network since the halving. And that’s not all. Weekly active addresses are also up by about 35%, although most of that increase comes from a single spike in network activity around August 10.
Overall, Litecoin’s halving event is sending mixed signals. Both bulls and bears will find meaningful metrics to point to that support their arguments, but the reality is that Litecoin’s 2019 halving isn’t necessarily telling us much about what to expect for Bitcoin in 2020.
If there is a lesson here, though, it’s this: despite all the speculation during the months before the Litecoin halving, not much has actually changed about how people use Litecoin. The price drop is probably related more to broader crypto market forces than to anything halving-related. And the underlying fundamentals of the Litecoin network remain intact.
With Bitcoin’s halving in 2020, we can expect prices to follow broader market trends and other network metrics perhaps ticking up or down. But Litecoin's experience suggests that Bitcoin's halving may well bring a similar lack of drama.