- NYDIG, a Bitcoin company, revealed that the recent Litecoin halving paints a bearish picture for the upcoming BTC halving event.
- The duration of BTC and LTC halving cycles has remained the same but the amplitude of price rally following each successful cycle has declined.
- Experts argue that Bitcoin’s halving cycle’s low-to-high and high-to-low returns have shown a weakening trend, painting a bearish picture for the asset.
Halving events where the reward for mining a block is slashed in half, have been considered key catalysts for assets over the past decade. Bitcoin and Litecoin halving cycles repeat every four years. However, over the past two cycles, experts have noted a shift in the trend in the case of Litecoin.
Litecoin price climbed to a multi-month peak weeks before the halving event and the event itself acted as a “buy the news, sell the rumor.” LTC price nosedived in the aftermath of the halving. Experts at the Bitcoin company, NYDIG, believe this is an emerging trend and expect to see a weakening trend in the upcoming BTC halving as well.
Why the upcoming Bitcoin halving is less likely to catalyze a massive price rally
The Bitcoin halving is considered a milestone that market participants and traders look forward to. A typical halving event, once every four years, slashes the mining reward associated with a BTC block in half and effectively reduces the volume of BTC in circulation. A reduction in circulating supply is expected to drive prices higher by the law of supply and demand. However, experts have noticed a shift in the trend.
The likelihood of a BTC halving acting as a bullish catalyst for BTC price is dwindling. Experts at NYDIG noted the past two halving cycle’s low-to-high and high-to-low returns showed a weakening trend. This was observed in the case of Litecoin as well, an asset created by forking the Bitcoin blockchain.
The past two Litecoin halvings have failed to catalyze a price rally in LTC, instead wiping out the market capitalization of the asset as the price declines in the aftermath of the event.
If halving events fail to push prices higher, what to expect
The macroeconomic events and Bitcoin’s correlation with US tech stocks has influenced the asset’s price rally more in 2023, since the last BTC halving. If halving events fail to drive BTC price higher, investors are expected to watch macro events and Bitcoin’s correlation with stocks more closely for cues on where the asset is headed next.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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