Sell The News? Litecoin Traders Capitulate Ahead Of Today’s Halving

August 2, 2023

On-chain data shows that Litecoin traders are showing signs of capitulation as the asset’s much-anticipated halving event is only a few hours away now.

Is Litecoin Halving A Buy The Rumor, Sell The News Event?

The “halving” here refers to a periodic event where Litecoin’s block rewards (that is, rewards that miners receive for mining blocks) are permanently cut down in half.

This event takes place approximately every four years and the next one, which would be the third, is scheduled to happen in around five hours if data from the mining platform NiceHash is to go by.

This third halving event will reduce the cryptocurrency’s block rewards from 12.5 LTC to 6.25 LTC. Historically, these events have been important for the asset, as they mark points where the cryptocurrency’s production rate (which is nothing but the block rewards, as miners releasing these coins is the only way to mint new LTC) shrinks, and hence, the coin becomes more scarce.

As these halving events are so significant, the market naturally speculates around them, leading to the coin experiencing volatility. In a new tweet, the on-chain analytics firm Santiment has revealed how the traders have been behaving in anticipation of today’s Litecoin halving.

In the above graph, Santiment has attached the data of two metrics related to LTC: “social dominance” and the “ratio of on-chain transaction volume in profit to loss.”

The former of these tells us what percentage of discussion on social media related to the 100 largest assets in the cryptocurrency sector is coming from Litecoin alone.

From the chart, it’s visible that this indicator has observed a large spike today, showing that investors are participating in a large number of discussions related to today’s halving.

The other indicator keeps track of the ratio between the profit-taking and loss-taking volumes on the network. As displayed in the graph, this metric has taken a plunge below the 1 mark recently.

The ratio being less than 1 implies that loss-taking is the dominant force on the market at the moment. The loss volume is not only more than the profit volume right now, but it’s actually outweighing it at a ratio of more than 2:1.

This extraordinary loss-taking may be coming from the investors who purchased coins ahead of the halving believing it to be a bullish event, but as Litecoin has only gone down lower recently, the holders have panicked and are selling at losses in an attempt to avoid going further underwater. The high social dominance of the asset may also likewise be because of FUD-related discussions blowing up.

Based on these signs, it’s possible that Litecoin may be going through a classic “buy the rumor, sell the news” event.