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What Litecoin’s rally means for Bitcoin

What Litecoin’s rally means for Bitcoin

Litecoin is less than three weeks away from its next “halving.” [Kanchanara via Unsplash]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

A closer look at Litecoin’s halving. A scheduled update to LTC’s economics and what it has to do with Bitcoin.

Crypto volatility has been low since June. All eyes are trained on this week’s CPI report for the latest inflation figures and market insights.

The week in numbers. The percent of Ethereum’s total supply that is currently staked, and other key stats to know this week.

HALVING MATTER

Litecoin rallies as “halving” nears — but what exactly is a halving?

In the last 12 months, Litecoin (LTC) — the 10th biggest cryptocurrency by market cap — is up around 90%, topping virtually all other major tokens. One factor that may be boosting prices? The next LTC “halving” is set to happen in about 20 days. If you don’t know what a halving is and why it might matter, no worries — we have you covered. 

What is Litecoin?

Litecoin was founded in 2011 as a fork of the Bitcoin blockchain — meaning the code that powers its network is similar to the code that powers its bigger brother. The goal with LTC was to create a cryptocurrency that offered all the core capabilities of BTC, but that could be a payment option with faster and cheaper transactions.

Got it. So what is a halving?

Like BTC, LTC is a “proof of work” blockchain, which means that miners on the network do the work of verifying new transactions and adding them to the blockchain, in exchange for a “block reward” in the form of LTC tokens. As with BTC, the LTC blockchain reduces the amount of that reward by half every four years — an event known as a halving (or halvening).

What’s the point of a halving? 

The halving mechanism is intended to make cryptocurrencies like BTC and LTC scarce, inflation-resistant resources. By issuing fewer tokens over time, the halving makes it more likely that LTC and BTC value will rise over time (assuming consistent levels of demand). In contrast, fiat currencies like the dollar typically decline in value over time via inflation, which is why you could get a Coke for a dime in the 1960s. 

Why might the prospect of the next halving be driving prices up?

Partly because of supply and demand — with the supply of new tokens set to be reduced, demand could rise. But halvings may also have some element of self-fulfilling bullishness, because they’ve been associated with jumps in value in the past. Many market watchers have been paying close attention to the LTC halving in anticipation of the next BTC halving (in April of next year). Of course, past performance is not indicative of future performance or demand.

The bottom line…

Anything that draws enough people’s attention to a cryptocurrency can drive volatility, and halvings tend to get attention. But for LTC, it’s not the only major news. Last month, a consortium including Fidelity and Charles Shwab launched a new crypto exchange called EDX — which aims to serve Wall Street clients and only offers four cryptocurrencies, one of which happens to be LTC. 

MARKET WATCH

Crypto volatility remains low since June bounce

Crypto prices have remained relatively stable since they spiked around the third week of June, with BTC remaining mostly above $30,000. Markets are also watching out for a key monthly U.S. economic indicator, which is set to be announced today (June 12). 

  • The Consumer Price Index (CPI) tracks the prices Americans pay for a wide range of goods and services — it’s generally considered to be a good proxy for inflation. Big movements up or down can trigger market responses in the opposite direction. 

  • Most economists and market watchers believe that this week’s CPI numbers will indicate a modest gain, which is one reason markets may have been holding relatively steady. Per CNN: “Economists expect a 3.1% increase in consumer prices for the year ending in June, which would be a cooldown from a 4% annual increase in May. Recent data has suggested that inflation is coming down, though it remains above the Fed’s 2% target.”  

  • Roughly $500 million flowed into crypto investment products in the last three weeks, flipping a nine week down trend. The data comes from a weekly Coinshares report that, per Decrypt, tracks “the investment activity of important exchange-traded products, mutual funds, and over-the-counter (OTC) trusts, in cryptocurrencies such as Bitcoin, Ethereum and other altcoins.” The current rally was sparked in part by the news that investment giant BlackRock is seeking SEC approval for an exchange-traded fund that would buy BTC and sell shares to investors via conventional brokerages.

NUMBERS TO KNOW

465 quintillion

The estimated number of hashes per second reached on the Bitcoin network this weekend, an all-time high. Bitcoin’s hashrate is a measure of the network’s total computing (or mining) power and is considered a key security metric. When the hashrate is higher, miners use more computational power to solve the time-consuming math puzzles required to add a new block to the network. 

190,000

The total number of employees in the cryptocurrency industry, according to a new report from digital asset firm K33. While one third of crypto professionals work at exchanges or brokerages, the rest contribute across several categories including “blockchain protocols, analytics, and mining” and “NFTs and gaming.”

20%

The percentage of Ethereum’s total supply that is currently staked, or locked into the network to help secure it. Just before the network’s Shapella upgrade in April, which enabled unstaking after nearly two and a half years, staked ETH comprised about 14.5% of the total supply. This growth defies earlier concerns that the ability to unstake would prompt many investors to unlock their holdings and cash out.

2x

Avalanche’s on-chain activity has doubled so far in 2023, thanks to a flurry of DeFi activity supported by the layer 1 blockchain. Although AVAX’s price is flat for the year, its spike in daily active addresses (roughly 60,000) is partly due to increased traffic on Trader Joe (the network’s top decentralized exchange) and Stargate (a cross-chain bridge).

TOKEN TRIVIA

Which of the following is a decentralized exchange?

A

Coinbase

B

Lightning Network

C

Uniswap

D

Polygon

Find the answer below.

Trivia Answer

C

Uniswap

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