With a price increase of 45%, Litecoin has been among the biggest winners in the cryptocurrency markets price rally within the last month. But that rally may not be over yet. The cryptocurrency, which was started as an alternative to Bitcoin, has been on a bull run this year, jumping by 323 percent since January this year.
There are no fundamental factors driving the increase in Litecoin’s price. When it was released, Litecoin was a replica of Bitcoin and powered by a similar algorithm and same block sizes. Since then, it has evolved. Within the cryptocurrency ecosystem, Litecoin has positioned itself as a cryptocurrency for daily transactions with a speedier confirmation time and more blocks generated per hour. But the coin has not inked any notable partnerships to realize that ambition and has ways to go.
eToro analyst Mati Greenspan points to an increase in transaction rates and hash rates, or the amount of computing power devoted to mining Litecoin, as reasons for trader enthusiasm about its prospects. But one could argue that the former statistic merely represents an increase the number of trading transactions by bots at cryptocurrency exchanges.
A more probable reason is an oncoming halving event occurring in 55 days for the cryptocurrency. The exercise will reduce the number of Litecoin for miner block rewards. Just like Bitcoin, whose halvening next year is expected to produce profits for traders, scarcity of the number of Litecoin in circulation will pump its price upwards. Currently, each Litecoin miner receives 25 LTC as reward for a block. After the halving event, miner block rewards will be reduced to 12.5 LTC per block. While it will eat into miner profits, that reduction will be compensated for by an overall decrease in mining costs.