December 16, 2017
It’s hard. It’s hard to see other cryptocurrencies take the limelight this week rather than XLM (STR). We’re such hard-core fans of the Stellar program that it really hit us emotionally to see that XLM wasn’t getting the true attention that it deserved but we still have firm conviction about where it will inevitably head.
Here are some recent highlights that made us hurt but also hopeful given that they are a testament to where Stellar Lumens can really go once it is truly recognised:
- The entire crypto market cap exceeded half a trillion dollars.
- Cryptocurrency 24 hour volumes rose to record highs above $35bn.
- Litecoin experienced unprecedented growth logging a 333% increase in just five days including a 9-hour 38% increase starting Thursday night, another 29% jump on Sunday and a 73% bull run Monday night.
- Ripple (XRP) was flat for over six months and then jumped 84% in the space of 24 hours from $0.27 to $0.51 taking the #4 rank in terms of market cap, currently sitting above $19bn. It did that again the day after pushing it past $0.70.
- ETH rallied over 50% in the last 48 hours.
- EOS, that was on a downwards trend for a few months, has been consistently registering 30%+ days rising confidently from $1 in November to over $7. Its market cap has soared above $3bn.
A lot of these rises were driven by positive momentum rather than any significant breakthroughs in fundamentals. But we already knew that. That wasn’t the problem.
What really made us uneasy was that our friends who knew little about crypto, were making phenomenal profits with BTC, LTC and ETH, and bragging about it, while we were left behind holding XLM. We had our fair share of FOMO and having redistributed our portfolio away from ETH, XRP and EOS to XLM just a week before, we couldn’t help but feel a sense of regret at missing out on the astronomical hikes in the past week. Irrationally, we thought we were our own worst enemies.
So why is Stellar Lumens, seemingly, being left behind getting ‘only’ 1% – 20% gains in a week while the likes of XLM’s closest competitor, XRP, had consecutive 80%+ days? Why is the market seemingly ignoring and even trivialising the superior technology behind XLM? How many more months do we have to patiently justify to ourselves that XLM is undervalued and it’s time will come?
We’ve all heard it: “XLM should at least match XRP’s market cap.”
That would mean that XLM should be worth upwards of $1 per unit. Looking at IOTA’s dramatic drive from $0.37 a month ago to over $4, nothing’s impossible.
But what will it take for XLM to get there?
At this stage it’s clearly not about fundamentals. It’s hard to say, but we’ve said it many times before; right now, the current crypto climate is not focused on the fundamentals and price is not representative of fair value. Psychologically speaking, people who are new to crypto won’t have a clue about circulating supply, inflation, scalability etc. There is no better measure for the lay person, than a simplistic price-to-price and scarcity of supply comparison. Hence Bitcoin at $17,000 is often thought to be worth significantly more than XLM at $0.15.
Being a non-profit organisation, the Stellar team will likely be agnostic to the price of XLM at any given moment. Their measure of success is based on adoption rather than its dollar value. However, we argue that one implies the other. A higher price is bound to increase awareness. Awareness fosters interest, which leads to more buyers and greater legitimacy. That has been the formula for Bitcoin, and while Stellar has superior technology, it has much to learn from the former’s branding.
What we’ve come to notice in the past year and especially in the past week is that branding is everything. Owning Bitcoin has become a status symbol, and futures have legitimised the asset. Bitcoin had the first mover advantage and it’s all that the news (and our friends and colleagues) ever talk about nowadays. Bitcoin whales pumped up its price and didn’t let go. That generated more interest and hype, which meant more money flowing in. Rinse and repeat. It’s a chicken-and-egg phenomenon. XLM needs to crack the top 10 in the cryptocurrency market cap rankings in order to really generate more consistent publicity.
One of the key reasons for why XRP has captured most of the volume this week is due to the redistribution of cash away from BTC post the launch of Bitcoin futures into ‘safer’ cryptocurrencies. XRP has successfully branded itself as one of the safest alternatives out there.
Nobody seems to focus on XLM’s circulating supply being less than half of XRP’s.
Rather the main worry seems to be XLM’s inflation mechanism, actually, a very clever way to ensure it survives in the long term and rewards XLM holders by redistributing it back to them every week. Plus it’s only 1% a year which is a very tiny amount to impact your bottom line.
There is a basic misunderstanding of what this means – investors solely think inflation means increasing supply and therefore a dilution on the price. In Stellar’s case this is inaccurate. Investors miss out on the neat idea that Stellar actually collects fees from each transaction done over the Stellar network (.00001 XLM) and redistributes them over time. Stellar is not-for-profit, so think of it as the organisation reinvesting its profits into the network. Clever. But it needs to be marketed this way!
If all of J.P. Morgan’s 259 million transactions on Black Friday passed through the Stellar network, this would only cost $466.20 and then again, this will be redistributed back to J.P. Morgan via Stellar’s inflation mechanism so it might as well have been free!
The Stellar team is actively looking at improving their marketing strategies and this is a powerful statement that they acknowledge this as a worthwhile exercise. In our view, Stellar will soon begin to:
- First and foremost, market XLM on what it does best – it is the bridge between fiat and crypto that costs next to nothing for every person, rich or poor, and for every organisation, large or small.
- Rebrand its inflation mechanism into a dividend scheme – i.e. owners of XLM will benefit by receiving a 1% dividend on their holdings per annum. Again, nobody cares about inflation in the traditional markets today to the extent that they do for XLM, yet for XLM it seems to have been interpreted the wrong way as described above.
- Redesign its XLM giveaways/airdrops by rewarding XLM holders directly rather than BTC and XRP whales. For example, if Stellar decides to pay XLM exclusively to existing holders on a 1:1 basis, it will incentivise more and more people to open XLM accounts. This is a superior model to feeding BTC and XRP whales that may not have any interest in using XLM and have a higher probability of dumping on the coin.
Now a lot of our readers will say that XLM has had a good run this year, up over 6,300% since March. Don’t get us wrong, IBM provided a massive boost to XLM’s profile but the market response was mostly muted compared to the implications of the Enterprise Ethereum Alliance for the price of ETH, Microsoft for IOTA, and American Express for XRP.
Some basic technical analysis suggests that there is a consistent tug-of-war between buyers and sellers on a daily basis. Every day we see candles with long tails, often acting as a dampener on the massive gains experienced by top-performing coins.
In our previous post on XLM, we gave an overview of what XLM has gone through historically. So what is our prediction for XLM going forward?
- XLM has surpassed the $0.10 psychological barrier. We are likely to see price increments to rise in 10 cent increments rather than 1 cent increments.
- In the space of a fortnight, XLM not only joined the billion-dollar market cap club but is now sitting at above $3.6bn. XRP is at above $31.5bn. We expect XLM’s market cap to continue making significant gains with definite potential to rise above $10bn.
- XLM will eventually crack the top 10, and as argued above, this will only keep improving XLM’s reputation in the market. Our expectation is this to happen in Q1 2018 as more ICOs are successfully launched.
What we are trying to say is that it is only a matter of time for XLM to be valued correctly and we can all do our bit by (i) opening XLM wallets and (ii) promoting Stellar to those around us.
Our conservative expectation is for Stellar Lumens to be valued upwards of $0.50 and closer to $1 in the first half of next year. While these numbers seem extortionate, they are not unreasonable given than XRP is already achieving numbers within that range.
If 2017 was a great year for all crypto, 2018 is going to be the year of quality cryptocurrencies. Let’s all hope that XLM gets the attention it truly deserves sooner than later.
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 Quoting XLMUSD = $0.18