We do the research, you get the alpha!
The much anticipated Litecoin “halvening” finally occurred at 10:16 UTC on Monday, with block rewards sinking from 25 litecoins to 12.5. But is the six percent price surge that attended the halving a boom, or a bust?
Crypto megabulls portray halvenings as seismic economic events in which the “shock” of the sudden supply drop spikes demand. A widely cited blog post, for instance, predicts that Bitcoin’s coming halvening, due in May 2020, will generate a 680 percent boost over the course of a year.
But today’s Litecoin spike is a seven percent rise (at press time) from last year’s price—which would be great for Wall Street, but is meh for a halvening. Likewise, most of that movement took place before the surge—as a result of hype, not supply, as outlined in an article published last week by Bloomberg. And whatever increase there was dovetailed with a broader increase across the entire market: over the same time period, Bitcoin jumped 9 percent, and Ethereum jumped 6 percent.
Did Bloomberg’s Joe Wiesenthal call it on Friday when he tweeted: “The ‘halvening’ is completely irrelevent [sic] as a price driver. You can't simultaneously believe that markets are smart/efficient and also believe that events literally everyone can see coming at the same time actually matter”?
Though that tweet sparked fury on Twitter, he might have been right.
“I was very disappointed with Litecoin's performance against both BTC and the USD,” said “CryptoGainz,” a veteran, pseudonymous crypto trader who was expecting an appreciation by at least 33 percent, in an interview. “I honestly expected buyers to be in control as the halving date closed in and for Litecoin to appreciate against Bitcoin, serving as a catalyst for a very small altcoin rally. Obviously, that didn't happen."
It’s not exactly unusual for altcoins to outperform Bitcoin, which Litecoin itself managed to do regularly this year—but today of all days, it did not.
Instead, says CryptoGainz, the halvening was “priced in”—that is, traders factored the event into the price before it occurred. This is the “efficient market” theory, the notion that the market value of an asset reflects all publicly available data and knowledge of future events; in crypto terms, that’s planned hard forks, halvenings, software upgrades.
“Whenever you have an event that is well known in advance the market has a tendency to price it in advance,” eToro chief analyst Mati Greenspan told Decrypt.
It might just be that there hasn’t been enough time for the market to properly settle, and that a future spike could be on the way. ”The strongest pumps are generally preceded by the harshest sell offs—it gets bought up and acts as a spring,” says CryptoGainz, noting the large crash that took place before today’s halvening.
But if the slight gains in the past few hours are anything to go by, even the most recent spike was overvalued, and the market knows it. Already, the price has “corrected,” with the last two hours seeing $5 knocked off of Litecoin’s high of $104 this morning.
CryptoGainz frames the problem in terms of Litecoin’s relationship with Bitcoin. Since traders use so-called “altcoins” mostly for their tendency to spike unexpectedly, Litecoin’s inability to rise more aggressively than Bitcoin—which itself saw a slight surge—makes the halvening a failure. “Any rise in altcoins that’s less than the rise in bitcoin during a given timespan is considered a loss,” said CryptoGainz. “It would’ve made more sense to simply hold Bitcoin during that time span.”
If number keep trending downwards...it'll be more of a disappointing than a halvening.