Seemingly out of nowhere, Litecoin (CRYPTO: LTC) is on the transfer once more. The coin is up 13% over the previous seven days after considerably underperforming the marketplace for a lot of the yr. Over that very same interval, each Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are mainly flat.
Why the sudden value motion in Litecoin? There seem like a number of various factors at work right here, together with a doubtlessly vital catalyst coming in early August. Consequently, some analysts are actually suggesting that Litecoin might soar as a lot as 200% over the following three months.
The Litecoin halving
The “Litecoin might quickly go parabolic” narrative is predicated round an upcoming occasion referred to as the halving, which is now scheduled for August 3. In a halving occasion, the reward paid to crypto miners for mining a brand new block on the blockchain falls by one-half. So, for instance, Litecoin miners are at the moment rewarded with 12.5 Litecoin each time they mine a brand new block. On August 3, that reward will fall to six.25 Litecoin.
This halving is mostly considered as being very bullish for the long run value of Litecoin because of the affect that it has on the circulating provide of the coin. There have been two earlier halving occasions, for instance, and every time, Litecoin has seen an enormous bump forward of the particular halving date. Taking an optimistic view of issues, there might be as a lot as a 200% upside concerned right here. This determine is derived from analyzing the 2 earlier halving occasions and learning the value motion each earlier than and after the precise occasion.
Picture supply: Getty Photos.
The issue is that there’s fairly a little bit of controversy within the crypto world about how lengthy such a rally lasts, when it really begins, and the way massive of a value bump there will likely be. For instance, when Litecoin noticed a rally on the finish of 2022, many individuals thought that was the beginning of the 2023 halving rally. Nevertheless it turned out to be a head faux. That being mentioned, the present consensus considering is {that a} Litecoin halving rally will begin roughly 100 days earlier than the precise halving date. In case you test your nearest calendar, it is simple to see that the rally ought to have already began, and that may clarify why Litecoin has surged over the previous week.
The issue with market timing
Nonetheless, as might be seen, getting the Litecoin halving proper takes a substantial quantity of market timing. In case you get in too early or too late, your returns would possibly range broadly. For instance, the height of any Litecoin halving rally seems to happen 50 days away from the halving date, so there appears to be a really restricted period of time to totally revenue from any Litecoin rally. By my calculations, when you’re not holding Litecoin by mid-June, you would possibly find yourself being very dissatisfied in what you get versus what was promised. Some are even suggesting the rally may not even happen.
As a long-term investor, it’s best to ideally not focus an excessive amount of on such short-term commerce setups. As a substitute, it’s best to search for long-term catalysts which are prone to end in future value beneficial properties. Thus, even when you miss out on a fleeting halving rally, there are nonetheless loads of different potential methods you would possibly stroll away with a successful funding.
Are there different Litecoin catalysts?
And that is why I am significantly involved — I simply do not suppose Litecoin has the best forms of long-term catalysts in place. For instance, some traders suppose that the latest introduction of the brand new LTC-20 token normal might result in a rally in Litecoin. However, from my perspective, this appears to be a last-minute try to money in on the excitement across the BRC-20 token normal for Bitcoin. In case you have not heard, the BRC-20 token protocol has sparked a meme coin frenzy round Bitcoin. So are we actually saying that the way forward for Litecoin lies with the meme cash?
Granted, there was some enchancment in underlying Litecoin metrics, and that is very encouraging. For instance, the variety of day by day lively addresses on the Litecoin blockchain just lately reached an all-time excessive. And the variety of day by day lively transactions can be at an all-time excessive. Nonetheless, this might be the results of latest congestion on Bitcoin, which has seen its transaction charges spike. Individuals would possibly simply be migrating to Litecoin for the brief time period till Bitcoin figures issues out. So, once more, I do not suppose now we have the makings of a long-term catalyst right here, only a short-term market anomaly.
Must you purchase Litecoin?
If, after having learn all this, you are still satisfied that it’s good to get in on the Litecoin summer season rally, I’ve 5 phrases to say to you: “Bitcoin additionally has a halving developing quickly.” Sure, as a proof-of-work cryptocurrency, Bitcoin additionally has a halving occasion each 4 years, and the following one is scheduled for April 2024.
So neglect concerning the Litecoin halving in 2023, and anticipate the Bitcoin halving in 2024. Bitcoin is a a lot better long-term funding than Litecoin. Even when a giant halving rally would not materialize for Bitcoin, you will not remorse it. Bitcoin has loads of different long-term catalysts to propel it increased.
