(Bloomberg) — Bitcoin investors have been helped by the surge in small token Litecoin over the broader cryptocurrency market over the past year.
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That’s because one of the driving forces behind Litecoin’s nearly 90% rise over this period was the so-called halving (or halving), which curbed the supply of the token, and this process is also in store for Bitcoin in the coming months. ing.
“Litecoin was pre-scheduled compared to the Bitcoin halving and often served as a sentiment indicator for the Bitcoin halving,” said Matteo Greco, a cryptocurrency research analyst at Finekia. ‘ he wrote in a note.
Litecoin was born in 2011 and aims to be faster than Bitcoin. Both blockchains use a “proof of work” mechanism, where power-hungry computing devices known as miners solve complex puzzles to protect digital ledgers.
Halving halves the amount of tokens miners receive as rewards for their work. The quadrennial event, scheduled for next month for Litecoin and around April 2024 for Bitcoin, is part of a process to limit the supply of tokens to 84 million and 21 million respectively.
Litecoin’s performance over the past 12 months outpaced Bitcoin’s rise of about 39% and 22% increase in gauges up to 100 tokens. However, Litecoin has recently calmed down, retreating slightly from its early July peak.
The halving is a combination of variables that are responsible for bitcoin’s partial recovery this year from the 2022 cryptocurrency crash, caused by tightening monetary policy and exacerbated by explosions such as the implosion of the FTX exchange. is one of
tailwind
Other tailwinds for the token include optimism that demand will increase following successful efforts by the likes of BlackRock and Fidelity Investments to launch spot Bitcoin exchange-traded funds in the United States.
EDX Markets, an institutional cryptocurrency exchange, also recently went live with the backing of billionaire Ken Griffin’s Citadel Securities, Fidelity and Charles Schwab. The company offers trading only in four cryptocurrencies: Bitcoin, Ether, Litecoin and Bitcoin Cash.
Bitcoin has set records in each of its past three halvings, but the current outlook for the cryptocurrency is clouded by the possibility of further rate hikes by central banks to tighten liquidity and keep inflation under control. ing.
“Risk Off Mood”
Investments such as equities are already starting to falter after a strong first half, with sentiment hit by soaring Treasury yields.
Traditional markets “seem to be in a more risk-off mood. We cannot yet assume that Bitcoin will ignore it,” writes Noel Acheson, author of the newsletter Crypto Is Macro Now.
“Of particular interest will be how Bitcoin will behave when the stock market correction finally arrives in earnest,” she added.
Bitcoin and Litecoin are still well below their record highs reached in 2021. Litecoin was trading around $98 on the New York market Friday afternoon, compared to $413 during the pandemic-era bull market. Bitcoin traded at around $30,000, falling below its all-time high by about $39,000.
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