- The upcoming Litecoin halving has attracted new investors.
- The price of LTC fell due to the lack of regulatory oversight.
Litecoin [LTC] is one of the oldest proof-of-work cryptocurrencies on the market. Despite the cryptocurrency’s first-mover advantage in this area, Litecoin hasn’t seen much activity or interest since the beginning of the year.
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However, things have started to change for Litecoin in recent weeks. This may be due to the upcoming halving that will take place on the Litecoin network.
Glass half full
Halving is a major event programmed into certain cryptocurrency protocols, including Litecoin, that occurs at regular intervals. During this event, the block reward given to miners for validating transactions and securing the network is reduced by half.
The primary purpose of halving is to control the issuance rate of new coins and control inflation within the cryptocurrency system.
The impact of halving is twofold. First, it introduces an element of scarcity to the cryptocurrency ecosystem. With the reduced block rewards, the rate at which new coins are put into circulation decreases.
This creates a sense of scarcity among market participants, potentially leading to an increase in cryptocurrency demand.
Second, halving affects mining rewards for miners. As the block rewards are halved, miners receive fewer coins for their mining efforts. This can result in reduced mining profitability, especially for miners with higher operating costs.
Some miners may be forced to leave the network if the cost of mining exceeds the rewards, potentially leading to a temporary drop in the network’s hash rate and overall security.
Litecoin, as it approaches its upcoming fourth halving, will experience a reduction in its delivery rate, resulting in fewer new Litecoins being mined. This scarcity factor can lead to increased demand and speculative activity in the cryptocurrency market.
In addition, miners will have to adjust to the reduced mining rewards, which may affect their profitability and mining operations.
The impending halving, which is expected to take place on August 2, has fueled traders’ enthusiasm. According to Santiment data, a noticeable increase of 1,185 addresses with at least 100 LTC was observed in the past 24 weeks. Many expect this to be a bullish event for Litecoin.
ChatGPT makes a comparison
The halving could help Litecoin gain greater market share in the PoW sector. To make a comparison, I consulted ChatGPT to highlight the various differences of multiple PoW cryptocurrencies and their various advantages.
According to the AI, Litecoin’s emphasis on faster transactions and lower fees is likely to attract more users and investors. As transaction volumes increase, network activity for Litecoin could increase, making it more attractive as a fast and cost-effective digital currency.
However, the inflationary nature of Dogecoin contrasts with the scarcity of Litecoin caused by halving. While Dogecoin has a strong community and viral appeal, concerns about dilution due to inflationary supply could favor Litecoin in the near term.
Meanwhile, users who value privacy and anonymity are more likely to stick with Monero because of its unique privacy features. However, for those who prioritize speed and lower costs, Litecoin can be a practical alternative.
As for Ethereum Classic [ETC], the focus on immutability and code-as-law principles could attract a different audience compared to Litecoin’s user base. The short-term upside for any cryptocurrency would depend on specific use cases and user and investor preferences over this period.
Does Litecoin Have a Competitive Advantage?
Recent regulatory oversight of several cryptocurrencies has had a negative impact on several altcoins. However, Litecoin was one of the few altcoins considered a commodity in the lawsuit filed against Binance [BNB].
The US Commodity Futures Trading Commission announced this on March 27, 2023 $LTC is a “true”.
— Litecoin (@litecoin) July 21, 2023
After seeking ChatGPT’s opinion on this development, it stated that the CFTC’s classification of Litecoin as a commodity could have several benefits. Regulatory clarity would empower market participants with defined guidelines, enhancing Litecoin’s legitimacy and sparking institutional interest.
This could increase liquidity as exchanges can list Litecoin more easily, increasing its accessibility. In addition, it may lead to the emergence of potential derivatives and investment products tied to the price of Litecoin, offering diversified investment opportunities.
Recognition from the CFTC could also affect global adoption and adoption, helping to support Litecoin’s growth.
The price tells a different story
Despite these factors, the price of LTC did not see much green at press time. After rising significantly after July 1, the price began to fall after testing the $114.99 resistance. The price fell 22.29% after showing multiple low highs and lower lows.
Read Litecoins [LTC] Price forecast 2023-2024
At the time of writing, LTC was trading at USD 89.35.
The RSI indicator suggested that the price’s momentum was with the sellers. In addition, the CMF also suggested a bearish outlook for the cryptocurrency, implying that money flow was not in favor of the bulls.