Vertcoin is due to hit a significant milestone on December 8 with a halving event that is set to see the reward miners receive drop from 25 VTC to 12.5 VTC.
As the second Vertcoin halving, many anticipate this could represent the first major supply squeeze – with mining rewards at just 25% of the 50 VTC possible back in 2014.
Seven years ago, when Bitcoin (BTC) first became susceptible to ASIC mining, a dedicated development community set about launching VTC as a Bitcoin hard fork purpose built for ASIC resistance.
It has long been the preserve of a committed community of GPU miners, that have kept the coin alive through major blockchain re-developments – this has led some to brand it as a miner’s coin, but the halving event could threaten this bastion of GPU mining profitability.
Will it impact Vertcoin’s price?
Normally, halving events induce a supply shock, with fewer new coins being mined, reducing the liquidity available to exchanges. But, in the case of Vertcoin, it is likely that GPU miners sit on a trove of VTC – accumulated in anticipation of the event – and this could impact the price dynamics of the supply shock.
Analysts have speculated that price action in the short term could remain rather static. An anticipated initial rally upon halving could soon be tapered off as miners sell off their stacks to meet market demand.
Some in the community have suggested that, unlike in 2017, the event could seriously dent profitability for big miners utilising low-RAM GPUs, forcing operations to move focus to other ASIC-resistant chains with better rewards, leading to a slow squeeze in liquid supply available to exchanges in the medium to long term time frames.
The underlying mechanic, as stated on the Vertcoin community website, remains the same simple principle as envisioned by Satoshi.
“The Vertcoin block reward is halved → half the inflation → lower daily available supply → higher demand → higher price → miners incentive still remains, regardless of smaller rewards, as the value of Vertcoin is increased in the process,” explains the website.
Do the analysts agree?
On-chain analysts at algorithmic investment fund Strix Leviathan reported that crypto assets do not outperform the market in the months leading up to and following block reward halving events.
“What we find is that the return distribution of an asset’s halving periods versus the return distribution outside of its halving periods reveals that they are statistically the same at a 99% confidence level,” explained the analyst.
“In other words, we did not find evidence that a halving event results in abnormal pricing action and we are dealing with a circumstantial illusion.
“It appears more likely that the return behaviour before, during, and after a halving coincides more with increasing levels of speculation than with an underlying shift in sell side pressure.”