What Litecoin’s decreasing hash rate suggests

• Slashing block subsidies impacted miners’ profitability.
• Contrary to the hype, LTC has exhibited bearish price action over the last few days.

The Litecoin [LTC] ecosystem recently witnessed its biggest event of 2023 when the block subsidy given to miners was slashed from 12.5 LTC to 6.25 LTC. Since then, experts have been busy examining the after-effects of the pivotal halving process, which took Litecoin one step closer to scarcity.

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One major source of discussion is the noticeable drop in the network’s hash rate.

Did miners abandon Litecoin?

According to CoinWarz, after a temporary uptick on the day of the halving, the hash rate has trended downwards. At the time of writing, the network’s computational power was 746 TeraHashes per second (TH/s), down 11% on a week-to-date (WTD) basis.

Source: CoinWarz

The decline could be explained from the perspective of miner’s profitability. People participate in mining activity owing to the incentives they get after creating a particular block. Now that these incentives, i.e. mined Bitcoins, have been cut to half, miners’ revenue has taken a hit.

Moreover, contrary to the hype, LTC has exhibited bearish price action over the last few days. At the time of publication, the “Digital Silver” exchanged hands at $82.51, marking a significant dip of 11% since the halving event, per CoinMarketCap.

Miners require cash and frequently liquidate their crypto holdings to meet their mining and infrastructure expenses. In the absence of strong returns, less inefficient miners are forced to exit the market, causing the hash rate to fall.

Tepid network activity since halving

The decline in hash rate could also be interpreted as weak network activity on the network. As LTC plunged, users shied away from using it in transactions. This was evidenced by the fall in transaction fees collected by miners.

How much are 1,10,100 LTCs worth today?

Mining machines didn’t operate at full capacity due to reduced network traffic, resulting in a drop in hash rate.

Source: Glassnode

Downturn to continue?

LTC’s bearish price action changed its dynamic in the derivatives market. The number of short positions taken trumped the longs, reflecting that investors expected prices to be bearish in the near term. According to Coinglass, the Longs/Shorts Ratio was below 1 at the time of writing.

Source: Coinglass