Litecoin traders are showing signs of capitulation as the highly anticipated halving event is just hours away, according to on-chain data.
The “halving” refers to a periodic event where the block rewards of Litecoin (i.e., rewards miners receive for mining blocks) are permanently reduced by half. This event occurs approximately every four years, and the next one, which would be the third, is set to happen in about five hours, according to data from mining platform NiceHash.
The upcoming third halving event will reduce the cryptocurrency’s block rewards from 12.5 LTC to 6.25 LTC. Historically, these events have been significant for the asset as they mark points where the production rate of the cryptocurrency (which is nothing more than the block rewards, as the release of these coins through mining is the only way to mint new LTC) shrinks, making the coin scarcer.
Due to the significance of these halving events, the market naturally speculates around them, resulting in increased coin volatility. In a recent tweet, on-chain analytics firm Santiment revealed how traders have been behaving in anticipation of today’s Litecoin halving.
In the above chart, Santiment has attached data from two metrics related to LTC: “social dominance” and the “on-chain transaction volume to profit and loss ratio.”
The former tells us the percentage of discussions on social media about the top 100 assets in the cryptocurrency sector that come solely from Litecoin.
The graph shows that this metric has experienced a significant increase today, indicating that investors are engaging in numerous discussions related to the halving event.
The other metric tracks the ratio between profit-taking and loss-taking within the network. As depicted in the graph, this metric has recently fallen below the 1 mark.
When the ratio is below 1, it means that loss-taking is currently the dominating force in the market. The volume of losses is not only greater than the volume of profits but exceeds it at a ratio of more than 2:1.
This extraordinary loss-taking may be a result of investors who bought coins before the halving, believing it to be a bullish event. However, as Litecoin has recently declined, holders have panicked and sold at a loss to avoid further losses. The high social dominance of the asset may also be attributed to the exploding FUD (fear, uncertainty, and doubt) related discussions.
Based on these indications, it is possible that Litecoin is going through a classic “buy the rumor, sell the news” event.
As of the time of writing, Litecoin is trading around $91, representing a 1% increase over the past week.
It appears that the asset has declined over the past day.
In conclusion, Litecoin traders are showing signs of capitulation ahead of the halving event. The market speculation and increased volatility have led to increased discussions and a dominance of loss-taking. As Litecoin’s price declines, investors are selling their coins at a loss, possibly causing a “buy the rumor, sell the news” scenario. The outcome of the halving event remains to be seen, and the cryptocurrency’s price will continue to be closely monitored.