Friends who are concerned about the currency circle must know that the major event that will happen in the second half of this year is the reduction of Litecoin production. It is expected that in August this year, Litecoin will usher in the second production reduction.

Many investors have also incorporated this production reduction into their investment plans, wanting to plan in advance, and there are even remarks that the production reduction of Litecoin may start a bull market.

So today we will take a look at what the Litecoin production reduction means, and what real impact it will bring.

What does Litecoin production reduction mean?

Friends who are familiar with Litecoin should know that Litecoin draws on the idea of ​​Bitcoin, which is similar to Bitcoin in terms of operating principle, and also follows the rule of halving every four years.

The total amount of Litecoins is constant at 84 million, and a block is generated every 2.5 minutes. The block reward is 50 at the beginning. For every 840,000 Litecoins generated, the block reward is reduced to half until the output reaches the set 84 million. pieces.

Up to now, Litecoin has been halved once, on August 26, 2015, the block reward was halved from 50 to 25. Then the next August will be the second halving of Litecoin, and the block reward will change from the current 25 to 12.5.

So what does Litecoin production reduction mean? In fact, the system is designed at the beginning, and everything is running according to the original design.

So why design a halving rule? To control inflation. Just imagine if Litecoin can be mined infinitely, then as the number of Litecoin increases and the circulation increases, it will naturally become cheaper and cheaper according to the relationship between supply and demand.

This principle also refers to gold. The total amount of gold on the earth is constant, and mining gold requires a lot of manpower and material resources. The production is difficult and the quantity is rare, so gold is very valuable.

What will be the impact of production cuts?

Next is the question that everyone is most concerned about. Will the production price increase?

First of all, predicting prices is a very unreliable thing. But we can draw a more reasonable guess based on economic principles and historical data.

First of all, theoretically, production reduction means that the supply will decrease in the future. According to the relationship between supply and demand, when the growth rate of demand remains unchanged, the growth rate of supply will decrease, and the price will inevitably rise.

Then let's take a look at the trend of Bitcoin, which has experienced two halvings.

Bitcoin's first halving took place on November 28, 2012:

After the halving, the price of Bitcoin rose by more than 80% within a year.

Bitcoin's second halving took place on July 9, 2016:

One month before the rise, Bitcoin saw a slight increase. Within a year after the halving, Bitcoin climbed from $651 to more than $2,500, a threefold increase.

Finally, let's take a look at the price change of Litecoin's first halving.

Litecoin’s last halving took place on August 26, 2015:Three months before the halving, Litecoin experienced a skyrocketing market, with the unit price rising from $1.3 to a maximum of $8.96, a nearly seven-fold increase.

Therefore, we have reason to predict that before the second production reduction of Litecoin, there may be an explosion of rising prices due to rising expectations, and a stable price increase due to changes in supply and demand.