Introduction Stellar (XLM) Lumens
The Stellar network is a mix of a blockchain based ledger and database that allows cross-asset transfers and crypto payments. The crypto token of the Stellar blockchain is called Lumens (XLM). Stellar is the blockchain and the payment network and Lumens (XLM) is the cryptocurrency. Both are governed by the non-profit organization Stellar.org.
Stellar describes itself as a platform that connects banks, payments systems and people. The main use case should be to move money across borders quickly, reliably, and for at almost no cost.
The software of the Stellar network is open source and developed by the community. Stellar was originally based on the Ripple (XRP) protocol. After a fork from Ripple, Stellar was formed by changing to a consensus code. The functions of Stellar are similar to Ripple. The Stellar network can handle exchanges between cryptocurrencies/tokens and FIAT currencies. Exchanges and transfers are very fast and similar to Ripple.
Although Stellar.org, the organization that supports Stellar and Lumens, is managed as non-profit, it is centralized like Ripple. Stellar.org is handling cross blockchains/platform transactions and very small microtransactions. Similar to Ripple (XRP) the Lumens token has a transactional role and serves for the transfer of value. Speculation on price increases of Lumen is, therefore, a bet on the adoption of the Stellar network.
The Investment Story for Stellar (XLM) Lumens Cryptocurrency
Our team analyzed intensively the Stellar network and the use cases of (XLM) Lumens. Since Stellar is a fork of Ripple (XRP) it has similar “features and bugs”. In a nutshell, Stellar is comparable to a simple version of PayPal. You can transfer money in more or less every currency around the globe instantly. However, this comes at the price of a centralized organization.
The features are:
- Very fast transfers (close to real-time settlement 2-5 seconds, similar to credit card transactions)
- Low costs for small transfers ($0.01 fee handles 600,000 transactions)
- Fast transfers for different currencies (automatic currency exchange)
- The software is open source, organization managing Stellar is nonprofit.
The bugs are:
- It’s a centralized organization
- Trust-based system and not comparable to decentralized blockchain solutions
The Stellar Protocol operates on the basis of an open membership system: any user can serve as a validation node. However, there are no incentives for nodes and the validation process. Currently, the platform has about 30 nodes powering the Stellar network. On Stellar, there are no economic rewards for validators; they dedicate their resources to maintaining the network purely on free will or based on central guidance and financing.
From an investor point of view, the only reason to hold Stellar (XLM) Lumens is that you plan to transfer money to other users, pay for services etc. The value of the coin will most probably move “with the market”. Growth in value is only expected if the adoption of Stellar grows exponentially.
Stellar XLM Lumens is not a strong investment story
The Stellar protocol is designed to change the financial sector, like PayPal did. The platform fees are really low, and their approach in facilitating cross-border money transfers is certainly a remarkable point. However, Stellar is still very far from disrupting the banks or becoming a leading force for value transfer. It as well cannot repalce banks, since the services are limited to the very narrow “Cash transfer”.
By and large, the platform’s ultimate success absolutely depends on its adoption by the masses or other financial institutions. Financial institutions could however move to Ripple (XRP), which has the larger organisation and structure. Private people and retail investors have many alternatives to XLM. Many other blockchain projects offer similar speed, costs in transactions and are less centralized.
Based on these we do not recommend Stellar (XLM) Lumens as an investment for the time being.
Investment Rating for Stellar XLM Lumens
Sell during stronger demand periods.
Investment Valuation Scores for Stellar XLM Lumens Token
The Valuation Scores are based on the Cryptocurrency Valuation Model developed by The Coin Research Team. Please see below for more details.
Cryptocurrency Investment Strategy for Stellar (XLM) Token
Investment Rating: Sell Stellar XLM
Buy Up to Price / Accumulate: –
Stop Loss: –
Position Size: –
Cryptocurrency Exchanges: Where to buy or sell Stellar (XLM) Token?
Best Exchanges to buy Stellar XLM Coin:
At the time of writing, XLM is being traded in 202 cryptocurrency pairs on key exchanges. The Exchanges with the biggest volume is ZB (Korean).
Buy It On: Binance (RECOMMENDED)
How to store Stellar XLM?
XLM Tokens are proprietary tokens to the Stellar network. Wallets for Stellar to be downloaded only through reliable sources. Due to safety reasons, we do not include links to wallets. Please check Stellar.org.
We recommend to not store the coins on cryptocurrency exchanges. It’s safer to use your own wallet, where you control the keys.
Store It On: Nano Ledger (RECOMMENDED)
Price Scenarios and assumptions for Stellar (XLM)
Bull Case Scenario:
Target price range 0.10 – 0.11 USD (125% – 137%)
(Assumes recovery of the cryptocurrency market)
Target price range 0.08 – 0.09 USD
(Assumes that the market turns around and no significant negative impact from launches of competitive exchanges)
Risk Bear Scenario / Stop Loss Scenario:
Target price range 0.05-0.06 USD (-38%)
(Assumes continuing bear market, competitors offer a better protocol)
Chart Development of Stellar Lumens (XLM)
- Price $0.087
- Market Cap
Key research findings: Stellar Lumens (XLM)
Research Background and Recent Updates of Stellar XLM
Stellar network aims to a global payment platform, an alternative to existing financial institutions.
They have a Ripple XRP like working product with extensive documentation and tooling, including an API and developer-centric platform. Big advantages are quick transaction times and very low fees.
Less positive are the central way of working for Stellar. Similar to Ripple, about 30 nodes control the network. There is no reward for independent nodes to participate in the validation process.
How does Stellar Inflation work?
Stellar does not use proof-of-work (PoW like Bitcoin) or proof-of-stake (PoS) like Qtum. It also does not use a dividend reward system such as Neo’s Gas generation. So you are asking how do you receive rewards, the answer is inflation. The Stellar distributed network has a built-in, fixed, nominal inflation mechanism. New lumens are added to the network at a rate of 1% each year. Each week, the protocol distributes these lumens to any account that gets over 0.05% of the “votes” from other accounts in the network.
Means in order to participate in the voting, you must own a minimum 0.05% of the coins (roughly $1,000,000 in XLM). This sounds like a rewards programme for the owners or whales, less for normal users. Small retail investors can, however, attend voting pools and stake their coins.
Summarized: Strong technology might not be enough if it runs on centralized nodes. Quick transactions “speak for itself”, but might be copied by other projects.
Stellar has to develop a route to adopt masses in order to have a long-term future. The very nature of cryptocurrency is so unpredictable that good projects may find themselves swept away with the rest of the 99% of projects that will fail.
Valuation of Stellar XLM
Please note like always the introductory reminder: Cryptocurrencies are a new asset class. The performance of these assets is based on a different set of fundamentals, compared to standard Stock or Bond assets. Most projects are in an early stage, very much comparable to startups during the Dot.com area. Therefore financial indicators (like Net Revenue, Margin, EBITDA, Cash Flow) would not provide valuable insights and are not available. Softer Key performance indicators are rarely available too, like the number of customers, adoption rate, etc.
The Coin Research Team has developed a comprehensive CRYPTOCURRENCY VALUATION MODEL for Tokens and Crypto projects. We use a broad set of indicators and group them into 3 categories:
- Project Fundamentals
- Token Economics
- Community / Social attention
The Score range is from 0 – 100 (maximum).
Scores above 70 indicate very solid projects with strong indicators in the subsegments researched.
Project Fundamentals Score
Token Economics Score
Community / Social Attention Score
The Coin Research Valuation Model for Cryptocurrencies considers the following:
- Fundamentals Score: Research of the Idea, Use Case, Whitepaper, Blockchain, Legal risk ICO, Funding level, Competitive situation, Roadmap, Github, Team, Leadership, Governance, Investors, Advisors, Transparency, Communication, and several others.
- Token Economics Score: Token use case, Value from the use case, Incentive to use it, Inflation, Distribution, Decentralization of Ownership, Dividend Model, Governance model, Exchanges, Liquidity, Daily Volumes, Fluctuations, and many more.
- Community and Social Attention Score: Followers, Hashtags, Mentions, Members Social Media channels, activity, quantity and quality, Tonality, Promotions, Educational material, Support Groups, etc.
Investment Risks for Stellar XLM and How to Mitigate Them?
The invest concept of a cryptocurrency is still novel and, compared to traditional investments, Binance Token doesn’t have much of a long-term track record or history of credibility to back it. With their increasing use, Cryptocurrency Coins and Tokens are becoming less experimental every day, but remain in a development phase and extremely volatile.
Please note and unchanged: Cryptocurrencies are pretty much the highest-risk, highest-return investment that you can possibly make.
Our overall risk evaluation is HIGH for Stellar (XLM).
Risk 1: Market Volatility for Stellar XLM Token
Cryptocurrencies and XLM included, are highly volatile assets. The 2-3% fluctuation you might know from the stock market, can easily translate to 8-12% fluctuation in Cryptocurrencies. During the same day!
Indeed, the value of the XLM Token has seen wild swings in price over its short existence.
The volatility of Stellar XLM fluctuates between 0.015 USD to 0.85 USD. Larger swings on a daily basis between 2-5% are rather usual than exceptional.
We see the Stellar XLM cryptocurrency coin currently in a downward trend, no consolidation in sight.
Company Inherent Risks for Stellar XLM
Company inherent risks are:
- Security breaches and hacks of the Stellar protocol. Note this is a “Software Only” company and the software/ protocol is everything they produce. Entirely digital companies and all cryptocurrencies face a high risk from hackers, malware, and operational glitches.
- Important team members could leave the project. The best ideas are worth nothing if there are no high skilled people to execute.
- Decentralized cryptocurrencies could develop their software and offer similar execution time, low fees.
The XLM Token price is quite dependent on the total market situation and the development of the cryptocurrency/blockchain industry. Negative developments in the industry, e.g. on Bitcoin, Ethereum and other main Cryptocurrencies will affect the price development of XLM.
Investors Risk Stellar XLM (Lumens) – Consumer Protection
Unlike traditional banks, cryptocurrency doesn’t have any official safeguards or insurances. Your wallet is not a bank! Your exchange is not a bank!
For example, whereas the Federal Deposit Insurance Corporation underwrites depositors’ savings to the value of $250,000 each in both banks and brokerages, crypto exchanges are not part of the program. If your exchange becomes insolvent, you will lose everything.
Ultimately, buying cryptocurrencies could result in losing everything you invested in them. You should never invest more than you can afford to lose.
The Worst Case Scenario and How to Avoid it?
The worst-case scenario for Stellar XLM is that the coin falls to zero. Or nearly zero. This can happen if the Software would be hacked, the issue is not solvable and the company would not be viable. However, the probability is low for this.
Form an investors point of view, the risk is that the investment does not develop positively and the coin drops in value.
How to avoid losses with cryptocurrencies?
We recommend working with a clear Loss limit Strategy. Means, when the coin reaches a level you set, e.g. 0.08 USD for XLM, you sell the investment.
This can be executed via Stop Loss Orders if you keep the coins in exchange. Stop Loss Orders allow you to set a price at which you want to sell a coin. Stop-loss orders are designed to limit an investor’s loss on a position in a security.
Example: if the coin reaches 0.08 USD, your Stop Loss Order will be executed and you would automatically sell at 0.08 USD. Note that if the price of the coin never reaches your limit price, your trade won’t be executed.
Stay tuned to The Coin Research and check our updates of the Stellar (XLM) Lumens cryptocurrency investment report. We will publish updates to Stellar XLM on a regular basis.
The Authors do not own Stellar XLM. This research report is strictly informational and is not investment advice. Please refer to our Legal Notices for further information. The Coin Research and the author did not receive compensation to create this research report, outside of our customers and subscription paying members. We have not been hired by the covered company or other third parties (e.g. consultants, advisors, VC) to prepare this research report.
Forward-Looking Statements and Projections:
Any estimates, projections, forecasts included in this document are speculative and based upon analysis of publicly available information. The targets, recommendations, thoughts shared in the report are subject to known and unknown risks, uncertainties and other unpredictable factors. The report might not cover all risks, might be materially wrong and forecasts might not materialize. No representations or warranties are made as to the accuracy of such forward-looking statements.