Litecoin Miners Capitulate as Hashrate Plummets

Data provided by BTC.com shows that large numbers of Litecoin miners have stopped securing the network following the halving event that took place at the beginning of August. From a high of 472.66 TH/s in mid-July, Litecoin’s hashrate is, at the time of writing, around 296.54 TH/s

A Litecoin Reward Drop

As scheduled, the number of LTC awarded to miners for adding a block to the Litecoin blockchain dropped from 25 to 12.5 on August 6. With Litecoin prices struggling, mining operations have become unprofitable and subsequently left the network. Using the mining profitability calculator provided by CryptoCompare and global average electricity prices from March 2019 at GlobalPetrolPrices.com, we calculated that Litecoin mining is only currently profitable using the popular 800W Antminer L3+ in Burma, Iran, Iraq, Qatar, and Egypt. At prices above 4c per KWh, so in the rest of the world, Litecoin can only be mined at a financial loss. Data available to Weiss Crypto Ratings suggests that the drop in hashrate securing Litecoin is even worse. The analysis firm states that the network is more vulnerable to attack with such a decreased hash rate.

#Litecoin hashrate has dropped 40%, suggesting that miners are leaving the network, which could render it vulnerable to attacks. This is the dark side of halving – it does not always lead to price increases. Sometimes, miners just pack up and leave.#LTC #crypto #cryptocurrency

— Weiss Crypto Ratings (@WeissCrypto) September 11, 2019

Popular Bitcoin on-chain metrics analyst Willy Woo has previously argued that Bitcoin price traditionally responds positively to such miner capitulation events. Eventually, only profitable operations are left, and miner selling pressure dries up. He has developed an indicator to measure mining activity. He calls it the Bitcoin Difficulty Ribbon.

Miners capitulate in bears, but also during block reward halvening events when suddenly only half the coins are mined for the same costs and the market price has yet to catch up to pay for it. See the compression after each halvening (marked as vertical lines) as miners die off. pic.twitter.com/IwRdpJ4DFt

— Willy Woo (@woonomic) August 1, 2019

Could the Litecoin Price Pump?

Woo’s miner capitulation hypothesis may appear to suggest that the Litecoin price could pump as a result of these miners leaving the network. However, any pump requires an increase in buying pressure. This is something Litecoin has been struggling with of late. Interest around altcoins, in general, has been waning as Bitcoin dominance is rising back towards its pre-2017 bull run levels. For some analysts, the price increase in Bitcoin over the past nine months has been the result of an exodus out of altcoins, such as Litecoin, back into Bitcoin. Although this theory may explain the Bitcoin price rise, without new money coming into the market, the sustainability of any moves caused by such a departure is highly questionable. Do you think Litecoin will drift further into obscurity now that the excitement of the halving is over? Or will buyers step up to bolster its price once again?

---

Images are courtesy of Twitter, Shutterstock.