Litecoin is up 1,500% after its last halving — here's how to trade the upcoming halving

One of the stalwarts of the cryptocurrency world, Litecoin (LTC) finds itself between two massive supply walls as it prepares for its upcoming halving event, said chart analyst Ali.

Ali [@ali_charts] pointed out on Twitter that Litecoin's current trading range is limited by two important supply regions. The lower support level, between $87 and $90, is supported by 625,000 addresses, which collectively purchased 7.8 million LTC. Instead, a resistance zone exists between $90 and $93, where roughly 590,000 addresses hold 6 million LTC.

This tight trading range puts Litecoin in a precarious position as market participants prepare for the upcoming halving event. Halving, a common occurrence in cryptocurrencies such as Litecoin and Bitcoin, is when the mining reward for new blocks is reduced by 50%, effectively reducing the rate at which coins are created. These events usually happen on a regular basis; for Bitcoin, roughly every four years.

The halving mechanism is primarily intended to curb inflation and promote scarcity within the cryptocurrency ecosystem. However, the price impact of the halving is complex and often the subject of intense debate among traders and analysts.

Halving Trading Strategy

For the uninitiated, trading around a halving event can be daunting due to the inherent volatility and unpredictability of the cryptocurrency market. However, there are some common strategies to deal with this situation:

1. Buy in anticipation of the event: Traders will typically buy cryptocurrencies ahead of a halving, anticipating a price spike due to a reduced supply.
2. News selling: Some participants choose to sell their holdings before or after the halving event. The strategy relies on the expectation that prices will temporarily drop because others are doing the same.
3. Watch out for post-halving pullbacks: Traders are paying close attention to a temporary drop in price after the halving, which could provide a potential entry point for a subsequent uptrend.
4. Do nothing: Some traders take a more passive approach, arguing that the market has priced in the impact of the halving event and expecting minimal price volatility.

Historically, Litecoin’s price action around halving events has been far from straightforward. It usually starts to fluctuate and rise about 100 days before the halving, and forms a local peak about 50 days before the halving. However, the immediate price reaction to the halving event has been mixed.

After the first two halvings, Litecoin saw massive gains: 14,200% after the first halving and 1,574% after the second halving. It's worth noting, however, that these gains were accompanied by a sharp correction in the months that followed, with declines of 73% and 83%, respectively.

As of late July 2023, the price of a single Litecoin is hovering around $89. The upcoming halving has fueled speculation about Litecoin’s underlying price trend, with traders keeping a close eye on the aforementioned supply wall and how Litecoin will react as the halving event approaches.

It is best to short LTC now and wait for a historical pullback. Then, enter at support around $75 and try to ride the wave up to $300.