Litecoin had its third halving at block 2,520,000 on August 2, 2023, cutting the block reward from 12.5 LTC to 6.25 LTC. However, the surge expected by LTC miners and investors did not materialize. Instead, the current price trend resembled the market movement following the last LTC halving in 2019. With four years gone by, the LTC price still lingers around $90, as of August 2. Many crypto users are disappointed about LTC’s diminishing popularity. But is this the full story? Does Litecoin still hold promise?
We invited ViaBTC, the largest LTC mining pool, to address some of the pressing concerns of investors and miners.
1. How does the latest LTC halving differ from the 2019 halving in terms of market statistics?
The second LTC halving occurred in August 2019. During the year, the total crypto market cap only peaked at $355 billion. As traditional institutions flocked to the crypto space over the next few years, massive liquidity has been brought to the market, attracting more investors. The more apparent evidence of that is the rising crypto market cap, which also hit $3 trillion in 2021. Today, crypto users can be found all over the world.
That said, as the market grows under favorable macro conditions, uncertainty rises. Many differences exist between the current halving and the second LTC halving in 2019, which are primarily reflected in market prices, active addresses, and daily trading volume.
While the two halving events resemble each other in terms of price trends, the extent and timing of the fluctuations differ. According to CoinMarket Cap, in the year of the second halving, the LTC price slid from its pre-halving peak of $141.9 (June 22, 2019) to $93.38 on the halving day (August 5, 2019), down 34.2%. 150 days later, the figure plummeted to $41.33, a 70.9% decline.
In comparison, this year’s halving saw LTC climb from $70 earlier this year to a peak of $113.23 on July 3 before dipping. On the halving day (August 2), LTC was quoted at $93.82, down 34.2% from the peak. By August 23, the price hit $66.1, a 40.6% decrease from the peak. We still need to wait and see whether LTC has bottomed out.
Moreover, the new LRC-20 narrative attracted a huge number of users to the Litecoin ecosystem, which raised expectations for the third halving. Compared to the previous halving, the third halving recorded a marked improvement in terms of both active addresses and trading volume around the halving day. On-chain statistics suggest that during the five days around the halving in 2019, the LTC network had 81,092 daily active addresses, with a daily trading volume of 31,433; in the five days around the third halving, on the other hand, active addresses averaged 217,574 (up 168.3%), and the average daily trading volume surged to 133,259 transactions (up 323.8%).
Many investors tend to be trapped by past experiences. They analyze current market conditions solely relying on existing patterns. In reality, along with constant market expansion and increased uncertainty, those experiences might not be relevant anymore. As such, in addition to the basic market statistics, we should examine a wide range of factors, including technical indicators, investor sentiment, and the latest developments, to make informed decisions.
2. How do mining pools feel about the halving?
Most miners have been pessimistic about the third LTC halving. In the month leading up to the halving, the LTC hashrate reached an all-time high of 1.03 PH/s, with LTC quoted at $107. Now that the halving is over, however, miners face two challenges. On one hand, the block reward dropped from 6.25 LTC to 3.125 LTC, cutting LTC profits; on the other hand, the continued decline in the LTC price has significantly raised mining costs. At the moment, excluding the DOGE reward from merged mining, all ASIC mining rigs have slipped below their shutdown price.
According to the on-chain statistics, since the halving, the LTC hashrate has experienced major swings and is now stabilizing around 700 TH/s to 800 TH/s. Compared to the 1.03 PH/s peak a month ago, it’s evident that certain miners have decided to halt operations after the halving. This is a further blow to the LTC network: Along with the hashrate drop and the exit of small-scale miners, the hashrate has become more centralized among a few major players, which poses a challenge to the network’s security.
At this critical juncture, it is vital for mining pools to maintain an efficient, stable mining network, enhance user experience, and retain existing miners. Moreover, leveraging the hashrate from miners, pools help the LTC network improve its security. For miners, the price decline is not as devastating as it may seem. As the mining difficulty goes down, LTC mining could still be profitable if miners could access relatively cheap electricity prices.
3. In light of the current LTC price and mining cost, what are the specific impacts of the halving on miners?
To begin with, as a direct result of the LTC halving, the block reward has been halved. For miners to restore pre-halving earnings, the LTC price would need to double. The current LTC price, however, has declined after the halving, adding insult to injury. Let’s put things into perspective: Antminer L7, the most competitive LTC mining rig in the market, generated a daily net profit of around $16 before the halving; yet, the figure has now dwindled to below $10. This translates to a daily loss of $6 per Antminer L7. For miners running hundreds or even thousands of mining rigs, that could mean massive losses.
Beyond hardware expenses, electricity represents the biggest cost in crypto mining, along with Internet access and O&M costs. Since the LTC reward has been halved, electricity now accounts for a larger share of the total cost, making LTC mining less profitable. Meanwhile, miners might have to bear greater costs and risks.
Finally, the diminished return also means that less competitive mining rigs might be outdated. At the same time, miners confident in the long-term value of LTC will keep upgrading their mining rigs. Given that shutdowns and upgrades could significantly impact the LTC hashrate, miners have to reassess their mining strategies and choice of mining pools. For instance, they could start by comparing payment methods on different pools. ViaBTC, the world’s largest LTC pool, offers three mainstream payment methods: PPS+, PPLNS, and SOLO. If you want to estimate your revenue on ViaBTC, submit a request on our official website or send an e-mail to support@viabtc.com.
4. Given that mining profits are influenced by price swings, how can miners avoid unnecessary losses? Are there ways to mitigate the risk of price volatility?
For miners, stability is the top priority. In other words, it is crucial to swiftly convert block rewards into stable assets like USDT to lock profits. For that to happen, the daily mining revenue must be paid as soon as possible. While the daily mining revenue is settled the next day on most pools, ViaBTC stands out as one of the few pools that settle mining rewards hourly, allowing miners to utilize block rewards much more efficiently. In addition, we also offer Auto Conversion, a feature tailored to miners that helps them convert earnings into BTC or USDT, which is pegged at a 1:1 ratio with the US dollar. It protects miners from asset depreciation as a result of price decline.
Market-savvy miners with their own analytical approach can also cope with price swings using ViaBTC’s Hedging Service and Crypto Loans. With Hedging Service, miners can borrow coins from ViaBTC to take profit ahead of time and repay the borrowed coins during subsequent mining operations. Miners in need of urgent liquidity could borrow Crypto Loans collateralized with their coins and redeem the collateral upon repayment. Used properly, the two financial tools can help miners maximize their profits.
5. Litecoin has gone through the third halving in 12 years since its inception, with the fourth halving scheduled for 2027. What is ViaBTC’s take on LTC’s development over the next four years?
Litecoin’s 12-year journey with uninterrupted operation is remarkable, a record that only a few crypto projects can match. Litecoin owes its success to miners contributing their hashrates to the network. Each halving poses a challenge to miners and the network. If the LTC price remains lackluster amidst the halved reward, the LTC hashrate will go down, as miners fail to establish consensus. In that scenario, Litecoin’s security could be at huge risk, with a rise in attacks on the LTC blockchain.
Litecoin had weathered major challenges before, but it consistently emerged stronger after each downturn. We are confident the third halving is no exception.
Over the next four years, although Litecoin will continue to be a testing ground for new technologies, the coin is likely to reemphasize its role as a “currency”. As LTC founder Charlie Lee claimed, “Litecoin is the Silver to Bitcoin’s Gold.” As one of the “precious metals” in the crypto space, Litecoin has found many practical use cases. In particular, the coin offers immense advantages in small-value online payments. We’re confident that more merchants across the globe will accept LTC payments.
Furthermore, in terms of ecosystem development, Litecoin might introduce more interesting programs. The LRC-20 launched this year, for instance, marks a major step in ecosystem applications, as it is likely to bring broader use cases, unlocking innovation and opportunities. Overall, Litecoin remains a promising coin that’s worth our expectations.