Litecoin’s halving may not be the reason why its hashrate continues to fall
Litecoin’s 2019 has been rather eventful. The altcoin performed spectacularly in the market’s bullish phase from April to June, which saw its valuation explode by more than 350 percent on the charts. At press time, it had recorded a growth of over 140 percent since the dawn of January.
The silver coin also witnessed its 2nd ever halving on 6 August, 2019, reducing the network’s block rewards associated with mining to 12.5 LTC from 25 LTC.
A lot of commotion was made prior to the event as analysts speculated how the halving would impact the coin’s price and its fundamental properties.
According to statistics from bitinfocharts, the hash rate of LTC has dropped significantly from 444.01 TH/s on 6 August to 321.78 TH/s on 26 August. Data from BTC.com suggests that the drop is estimated to be about 28 percent, a drop which saw the difficulty drop from 15.9 million on 4 August to 11.33 million on 26 August.
The reduced interest in mining has been directed towards a decrease in block rewards, but the lack of price movement can be attributed to another factor.
After halving, it is generally believed that the price of a virtual asset would undergo a shift in its valuation, which could surface either side of the spectrum (either a spike or a slump). However, there was a genuine absence of a flash hike of fall on the charts, as LTC progressively dropped valuation throughout the month.
Recent research however, argued otherwise and explained that a virtual asset’s halving did not interfere significantly with its price performance.
According to the research, a limited impact on the price is often witnessed following a halving event. When the total return, Sharpe and Sortino ratios of an asset undergoing a halving were examined, it was observed that it did not perform out of the ordinary. The research highlighted the example of Bitcoin and Litecoin, stating,
“LTC has now outperformed the market twice in the pre-halving period with performance falling to the bottom 25% in the six months following the first halving. BTC on the other hand lagged the market leading up to the halving but was in the first quartile of performance following the last halving.”
The profitability of mining however, might have had a major say as it was reported that the most profitable miners on the network only made a profit of 10 to 20 percent, following the drop in price from $93 to $74 after the halving.