Is XLM a Good Investment?

Date:

Just like every other cryptocurrency, the pandemic affected XLM in March 2020 and it went into a spectacular fall. Since its recovery, it has been going higher and higher. Although its price is still a far cry from competing cryptocurrencies, it is not very far behind. Its price continues to rise making it a juicy option for investment. However, the one question being asked by investors who had not forayed into cryptocurrency is: is XLM a worthwhile investment?   

What is Stellar Lumen?

Stellar Lumen is a Blockchain network. Stella is the Blockchain network while Lumen is its native token. It is an open-source Blockchain network that uses a distributed payment mechanism. XLM holders can make easy payments among themselves, with institutions and financial services like banks. It is designed in such a way that it facilitates fast and seamless transactions.    Stellar Blockchain was created in 2014 as a hard fork of Ripple. Bitcoin, Ethereum, Cardano, Polkadot and Litecoin, amongst others validate transactions either through a Proof of Work or Proof of Stake mechanism. Stellar Lumen is different. Its blockchain uses a Federated Byzantine agreement algorithm known as Stellar Consensus Protocol. It neither facilitates new coin mining nor validates transactions. It uses an entirely different mechanism.   

History of Stellar Lumen

As mentioned earlier, Stellar was a hard fork of Ripple created in 2014. It was created by Ripple Labs’ Founder, Mt. Gox, a crypto mogul, Jed McCaleb, and Joyce Kim, a close associate to Jed.    As a well-known crypto entrepreneur, Jed collaborated with Blockchain experts. His Stellar Lumen quickly received funding. Reputable organizations like Google, STRIPE, Fast Forward, and BlackRock funded the Stellar project. Stellar arrived in the trading market on September 4, 2014, and was valued at $0.0021   On January 3, 2018, Larry Sukernik tweeted about how Stripe funded Stellar Lumen with $3 million. In exchange, the company held a 2 billion Lumen token.    https://twitter.com/lsukernik/status/948656328632922117?s=20  

Features of The Stellar Blockchain

Unlike Ripple which has a centralized authority, Stellar doesn’t. It deploys a decentralized open-source network that uses a Federated Byzantine Agreement to confirm transactions.  In an FDA, numerous nodes work independently of one another to verify and record transactions in the ledger.   Therefore, instead of waiting for validators to validate transactions, an agreement is reached among the nodes. Each node would select a reliable counterpart node to form a quorum. This system forms a large number of quorums known as quorum slices. After which transactions are recorded in the ledger.    As the system validates transactions through FDA’s reach in these quorums, there is no coin mining, thereby, making transactions speed faster. A Stellar transaction takes no more than 5 seconds.   

How Does Stellar Increase Coins in Circulation?

The Stellar company increases its total supply by 1% yearly. The company controls the total supply of Stellar Lumen in circulation.    Another feature of Stellar is its ability to easily facilitate multi-currency transactions. The Blockchain has a platform to exchange fiat currencies with no fuss. For example, if you want to change USD to GBP, the Blockchain would find someone that wants USD in exchange for GBP.    The blockchain also facilitates transactions among fiat currency and cryptocurrency exchanges to satisfy its customers. 

Lumen Token

Lumen is the native currency of Stellar. It facilitates transactions in a way many other cryptocurrencies don’t. A native fiat currency holder can convert the currency to Lumen, send it to whomever he wishes while the receiver converts the Lumen to his native fiat currency. Lumen ensures cross-border payment.    What makes Stellar exceptional is that its cross-border transactions can be carried out in a matter of seconds. It doesn’t have to wait as it has the best ready-made exchanges to exchange currencies with as a mainstream and reliable source of payment and exchange.   The Stellar Lumen network is gaining increasing usage among individuals and reputable institutions. Some of the big companies that currently use Stellar Lumen include: 

    • Deloitte
    • Wipro
    • Hijro
    • Wanxiang Blockchain Labs
    • Quantoz
    • Anglo- African
  • Swipe 

 

XLM Price History and Prediction 

After it was launched on September 4, 2014, XLM was traded around $0.003 and $0.004. It was not well known among cryptocurrency traders in 2014. Subsequently, it never rose consistently until 2017. From 2017, it saw a series of spikes and troughs. Generally, it had risen by over 180% over the last year. So, what has been the price trajectory of XLM?    Its price was still in cents until May 2017. Around the end of 2017 and early 2018, XLM boomed. The coin reached its all-time high on January 4, 2018, when it reached a $0.9381 price. It didn’t take long before it dropped back. It traded around $0.20 and $0.40 throughout 2018. For much of 2019, it didn’t go higher than $0.10. That was when the Stellar Development Foundation took drastic action. They burnt a large number of XLM so that its price would increase.    However, its price remained under $0.10 in 2020. On November 21, 2020, it broke the $0.10 barrier and grew around $0.10 and $0.20. it closed 2020 at $0.1284.    The 2021crypto bull run also affected XLM. It witnessed a boom like the 2017/2018 rise. However, it never broke the then all-time high. It had an intraday high of $0.4023 on January 7. It traded around $0.3 for the rest of January, closing the month at $0.3057.    In February, its highest price was $0.6008 on February 13 while it closed the month at $0.4067. It continued growing steadily from then.    It hovered around the $0.4 price for much of March. Its highest price in March was $0.438, closing the month at $0.4109. It hit new highs in April, reaching a high of more than $0.6 and trading at $0.5295 at the end of April.    XLM rose and crashed in May. It hit a high of $0.7965 on May 16 while it dropped back to $0.4054 a few days after. It closed in May at around $0.4. June and July witnessed further crashes of XLM. It closed July at 0.2857, a far cry from its prices in May.    XLM rallied back up in August before another hit in September. It traded around $0.3 at the end of August. It closed the month around $0.3048. In September, it went back down by 8.5%.    It started a gradual and stable recovery in October and November. On November 10, its price reached a peak of $0.43. At the time of writing, its price is $0.25.    Walletinvestor predicts that the XLM price could reach $0.56 in 2022 while it could reach $1.50 in 2026.    Digitalcoinprice forecasts that it could be at $0.54 by the end of December 2021, $0.60 in 2022, and $1.10 in 2025. It also forecasts that the XLM price could be around $1.28 in November 2026 and $1.60 two years after (2028).  So, the platform sees XLM coin as a profitable short- and long-term investment.   Tradingbeasts prediction also states that XLM could be around $0.54 by the end of 2022. It could trade around $0.62 by the end of 2023 and $0.65 a year after. 

Is Stellar Lumen A Good Investment? 

 

Pros

  • Transaction Cost: One plus for Stellar is its low transaction and transfer cost. Transferring a Lumen token costs $0.000004. In comparison, ETH transactions cost $16.01. Even though competing Blockchains like Cardano, Polkadot and Tron boast of low transaction fees, it is nothing compared to Stellar Lumens’. Its transfer and transaction fees are near zero.

 

  • Transaction Speed: One other distinguishing feature of Stellar Lumen is its speed. As it doesn’t need miners for validation, its transactions, and exchange work at break-neck speed. It can do as many as 5000 transactions per second. Its speed is 500 times faster than Bitcoin and 250 times faster than Ethereum. 

 

  • Accessible: Another feature that makes XLM a force to reckon with is its accessibility across the world. As long as the user has an internet connection, they can trade XLM from any part of the world. 

 

  • Multi-Currency Exchange: One big problem that XLM solves is currency exchange. Traders usually find this very difficult but through the Stellar Lumen Blockchain, it is very easy. It can help holders convert currencies either fiat to crypto, crypto to fiat, or among fiat currencies in a matter of seconds. You don’t have to worry about having a Lumen token in any part of the world. It can convert to the place’s fiat currency.

 

Cons

  • Mining Rewards: Even though it has very good functions and potentials, one thing that can put prospective traders off is its lack of mining rewards. It doesn’t have a coin mining validation system. Therefore, there is no way to earn new XLM tokens. It doesn’t use either of the two popular algorithms, Proof of Work or Proof of Stake. Rather, it deploys a Federal Byzantine Agreement known as Stellar Lumen Consensus. 

 

  • Its Network Is Its Sole Cryptocurrency Growth: XLM doesn’t rely on the forces of demand and supply to grow its network. Its supply is regulated by the Stellar Organization. Rather, it relies on the rate of crypto technology adoption to grow its price; its price naturally rises when leading crypto projects like Bitcoin and Ethereum rise. It is less traded compared to Bitcoin Cash, Dash, Dogecoin, Cardano, Polkadot, and others.

  Determining whether XLM is a good investment is entirely based on the investor. The investor should have a trading plan and risk tolerance. After doing research, if you believe in the Stellar Lumens project and the project fits your profile, you should go for it.   Good research is essential for making the right decision. You shouldn’t invest entirely based on predictions by forecast bodies and only a small percentage of your portfolio should be allocated to XLM, preferably no more than 10% if you have a strong belief in the project. While it has the potential for rising over the years, remember that XLM could also take a plunge.   

JOIN OUR NEWSLETTER

spot_imgspot_img

Popular

Disclaimer: The views expressed in The Coin Times are solely those of the authors cited. It does not constitute The Coin Times recommendation to buy, sell, or hold any investment. Before making any financial decisions, it is recommended that you undertake your own research. Use the information supplied at your own risk. For additional information, please see the Disclaimer.

More like this
Related

How Do You Know When The Next Alt-Season Is Coming?

Markets operate in a variety of ways. A single...

Crypto.com Named Official Partner Of Miami Grand Prix

Organizers of the Miami Grand Prix have signed a...

Crypto Mortgages and the Housing Industry

How Crypto-Currency Impacts Mortgage Industry Cryptocurrency is the new form...

An Overview of Initial Coin Offerings (ICOs)

When a company needs to raise funds, it will...