The Stellar Community is nice, however its Lumen Coin will lag behind – Investorplace.com
We saw most of the altcoins recover. But not Star lumens (CCC:XLM-USD). After falling from around 79.6 cents to below 30 cents shortly before the sale, it barely recovered. In fact, Lumens (as the coin itself is called) is showing signs of an even lower trend as it is trading at around 35 cents.
What’s behind it? A major reason is the lack of exposure to recent trends in cryptocurrency. That said, other coins have the DeFi (decentralized finance) catalyst that they can fall back on. But XLM? It’s similar to XRP (CCC:XRP-USD), the native coin of Ripplethat is hardly exposed to this trend.
Granted, it doesn’t have to have high DeFi skills to gain popularity. Like XRP, this is a coin that focuses on transferring international funds. It too offers a faster and cheaper alternative to transfers made through the traditional financial system.
In the long run, Stellar (as the network itself is called) could become widespread. In theory, this will help add value to the native coin. It is still unclear whether this will be the case. Since the “hotter” altcoins offer you greater profit potential, there is little reason to consider them.
Stellar lumens can disrupt referral
Lately, altcoins with high DeFi capability have been in trend. Therefore ether (CCC:ETH-USD), which is most commonly used in such transactions (like staking), has held up relatively better than Bitcoin (CCC:BTC-USD) Post-correction. And that’s why other DeFi-focused coins like Cardano (CCC:ADA-USD) have also proven themselves.
Stellar Lumens can focus on a less popular area (international money transfers). But it’s a niche that crypto could easily disrupt. Even in today’s globalized world, the traditional remittance system remains inefficient. Transaction fees are still high. And it takes days for the transfers to complete.
For example, as Stellar himself explains on its website, foreign workers pay an average of about 7 to 8% for the $ 500 billion remittances they send each year. For transfers to some developing countries, the fees can be up to 15%. However, this alternative offers a faster and cheaper alternative. Transactions are completed in 3-5 seconds. As for the fees? A fraction of the fees charged by traditional money transfer operators (MTOs).
Sounds good right? But there are two major caveats. First, this network is still working to gain critical mass. It could take some time for this to become a major alternative to old school MTOs. Second, while the technology behind it has great potential, it cannot result in much higher XLM prices over time. That doesn’t mean the trend will continue to decline. But when compared to other opportunities (either in crypto or even stocks) this doesn’t seem like a great long-term investment.
Network growth may not help coin price
It is clear that the Stellar network could take off. Its technology could one day be in great demand as it offers a faster, cheaper way to send money overseas. However, this alone cannot cause XLM to go “to the moon”, be it in the near future or in a few years.
Why? Stellar Lumens may require the use of its native coin to pay transaction fees. But it’s not the only medium of exchange you can use on his platform. Since the network was built for the purpose of tokenizing fiat currencies, you can USD coin (CCC:USDC) or other stable coins that are backed by other currencies in order to carry out transactions.
This could limit the appreciation of XLM compared to other altcoins. Granted, the platform requires that all users also have a lumen in order to use the network. The number of lumens is fixed at 50 billion forever. In theory, the coin price could increase over time as more users join in to transfer money, all of whom must hold at least one lumen.
However, this long-term increase in value could fall far short of your expectations. Instead of climbing 34 cents today to $ 1, 5, or even $ 10, profits could be much more gradual. Not only could it follow other cryptocurrencies, it could also follow traditional investment indices like that S&P 500 also.
A great idea, but not a great crypto opportunity
The Stellar Network could become a major disruptive force in the long run. But the price of lumens? It might be harder to get back to its recent highs, let alone the value of altcoins like ETH and ADA last year.
Stellar Lumens can be a crypto project that offers a solution to a longstanding problem (time-consuming and costly money transfers). But as an investment option? Look elsewhere.
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At the time of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He has held positions (neither directly nor indirectly) in other securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing individual stock analyzes for web-based publications since 2016.