Investors in such turbulent economic times are looking for assets that yield the maximum returns. Cryptocurrency is holding a stand in such a case. Even though investing in cryptocurrency business is a risky affair. Lately, the markets are volatile but still, some of the crypto-coins are generating good sums.
A recent observation of investors accumulating Litecoin has grabbed attention in the investment world. Litecoin underwent “halving” in August last year. The quarterly process brings in a fresh review of how policies and businesses are run. “Halving” cuts the mining rewards to 50% and this raises prices. While it may be good news for some it is bad for few as well. Litecoin is a type that enjoys certain exclusivity in terms of being a deflationary asset.
The various implications that the Litecoin might have are –
- Mining Profits
Since a reward cut of 50% is levied, it means that miners would have to churn fewer coins at the same hash rate. The gains are inevitable with the assumption that the price after halving remains constant.
- Reduced Mining Difficulty
When there are lesser mining rewards, lesser block generations are in place. This might prove to a dud in the business operations. Miners would want to shift to a more profitable cryptocurrency to conduct mining activities. When a significant irregular number of miners leave the organization, the system becomes more and more centralized. This is not very favorable for the security of the network.
However, a reduced hash rate reduces mining difficulty. This can bring down the cost of incentives for mining. Now since the mining difficulties come down, some of the miners might wish to re-join.
- Favorable pre-prices
When the cost of the incentives is brought down and saved, the price of the coin is likely to support it. If the cost of the incentivization is not decreased then the same would reflect onto the prices. Most of the empirical data show that Bitcoin and Litecoin have seen a 90-period increase in price before the halving. The same, however, is not noticed post the process.
- Status Quo in transaction fees
While more or less the transaction fees have no effect, alternatives like Layer 26 solutions like Lightning Network have proven to keep the fees down.
Litecoin has increasingly been reported as a great currency to invest in. Thanks to the halving, Litecoin is able to save itself from unwanted casualties.