Stellar (XLM), The Cross-Border Transactions Protocol

Stellar (XLM), The Cross-Border Transactions Protocol

Stellar (XLM) is an innovative payment protocol that utilizes distributed ledger technology, enabling cross-border transactions with different types of currencies. In particular, Stellar is effective in connecting financial institutions, markets, and users by offering the maximum functionality to all stakeholders involved in terms of combining crypto and traditional financial instruments.

The cryptocurrency has adopted a moderate 1% annual inflation to account for lost tokens, and all of them are distributed via the open voting system. The Stellar blockchain is completely decentralized and open-source, making it especially convenient for users from different countries of the world and spheres of interest.

The typical confirmation time for each transaction equals 3-5 seconds, making it highly competitive in comparison with other alternatives available at the market.

The high productivity allows supporting thousands of transactions per second, thus effectively avoiding scalability problems experienced by Ethereum and other platforms. Multi-signatures and smart contracts also provide users with the maximum legal protection and flexibility in regards to coordinating their efforts and arriving at mutually beneficial agreements. 

XLM’s current market price is $0.1996 with a circulating supply of 24.8 billion and the maximum supply of 50 billion. 

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Figure 1. Dynamics of XLM’s Price (USD); Data source – CoinGecko

XLM’s price demonstrated the rapid growth in the first half of 2021, following the general crypto market trend, exceeding the level of $0.7. However, it experienced a rapid correction within the following two months with the subsequent price stabilization in the range of $0.2-$0.4. Although investors recognize Stellar’s strong competitive advantages in terms of cross-body transactions, the existing uncertainty in the crypto market prevents XLM’s price from testing the higher levels reached in 2021.

Investing in XLM: Potential Gains and Risks

The long-term demand for XLM will largely depend on the scope and structure of cross-body transactions as well as the rates of crypto and financial markets integration. As the ultimate adoption of crypto solutions in the traditional financial sector seems inevitable, XLM has a high potential for exceeding its all-time high level within the next several years. However, it will still need the respective support from BTC, ETH, and other major cryptocurrencies.

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Figure 2. 1-Month Dynamics of XLM Price (USD); Data Source – CoinGecko

The short-term dynamics of XLM’s price indicate the temporary price stabilization after the rapid correction several weeks ago. However, the current channel still prevents XLM from reversing the negative market trend. Only if the price exceeds the resistance level of $0.22, Stellar may experience a price increase in the short run. At the same time, the overall conditions in the crypto market and expectations of the Federal Reserve’s interest rate policy decisions in March increase the risks of the subsequent price correction and the further XLM’s decline in the following months.

Thus, if XLM’s price breaks the current price channel downwards, investors may be interested in opening a short position with the expectations of further price decline and short-term gains. The technical analysis and support levels should be used to determine the end of correction to properly control the overall market risks in the long run.

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Dmytro Kharkov

Holding a Master’s Degree in Finance (Distinction), Dmytro Kharkov has proven expertise in Business Analytics, Data Analysis, and the crypto market. He has completed online courses on Machine Learning and Data Science from the leading universities and online schools. He closely monitors the latest crypto analytics insights from Glassnode, IntoTheBlock, Santiment, etc.