The second quarter of 2019 has seen a new wave of investment start to flow into Bitcoin and Litecoin. As a result, the Bitcoin and Litecoin price is edging higher. Many also believe that renewed investor interest is the result of upcoming Bitcoin and Litecoin halving events. Here, we’ll look at what halving in cryptocurrency is. More importantly, we’ll look at what halving might mean for Nigerian investors.
What is Bitcoin and Litecoin Halving?
Commodity prices like those of gold and silver are governed by economic stock-to-flow ratios.
When a commodity is in plentiful supply, the price of existing stock is low. Conversely, when a commodity is more scarce like gold, the price of existing stock is higher.
Bitcoin and Litecoin are both designed to mirror high stock-to-flow ratios found on precious metal markets. As more coins are mined, mining becomes more difficult. This happens incrementally. However, every 4-years, the number of new coins entering circulation is also abruptly reduced by 50%.
How Bitcoin and Litecoin Halving Works
When Bitcoin and Litecoin users send and receive transactions, transaction details are bundled into encrypted blocks of code. These blocks are issued to miners who then attempt to break each blocks encryption.
When miners are successful, they validate transactions and add these to the Bitcoin or Litecoin blockchain transaction ledger. In return, miners receive newly minted Bitcoin as a reward for their efforts.
When a Bitcoin or Litecoin halving event occurs, the amount of Bitcoin or Litecoin being issued to miners is halved.
How Does Bitcoin and Litecoin Halving Effect Coin Prices?
To date, there has been one previous Litecoin halving event and two previous Bitcoin halving events. In all three cases, price rallies before and after halving resulted in significant gains for Litecoin and Bitcoin.
Prior to Bitcoin halving in 2016, BTC was trading at approximately $600. Today, Bitcoin has been trading at over $3,000 since August 2017. (And as high as $19,000 at one point.) This represents a 500% Bitcoin price increase in under 3-years.
When Will the Next BTC and LTC Halving Take Place? Litecoin will experience its second halving event on August 5th this year. Nine months later in May 2020, Bitcoin will then experience the third halving event since launching in 2009. This makes the present an optimal time for Nigerians to consider investing in BTC and LTC. However, it should be noted that price rises are not guaranteed. No one should, therefore, invest in either coin, before first conducting their own research.