Stellar Lumens XLM

About Stellar Lumens

Stellar is a network through which one currency can be exchanged for another, from anywhere in the world. It has its own native digital currency, which is called the Stellar Lumen.

Lumens are used to initialise accounts and to make transactions, but the network as a whole does not lean toward any particular currency. If you want to trade something then the chances are that you can do it through the network.

• Since launching, the Stellar network has processed 450 million operations made by more than 4 million accounts.
• The Lumen was originally called the Stellar, but this was changed when things got too confusing.
• At the outset, there were 105 billion Stellar Lumens tokens; this has since been cut to 50 billion.
• A block (or ‘ledger’) is mined every 4 seconds

History of Stellar

The protocol was launched in 2014 by Jed McCaleb, the co-founder of Ripple. It’s based on the same underlying technology as Ripple, being a fork from that technology that’s since been developed in a different direction.

Stellar was initially boosted by $3 million in seed funding from Stripe, whose CEO, Patrick Collison, collaborated in the creation of the Stellar Development Foundation. This non-profit (as you might imagine) is responsible for pushing the protocol forward. The company launched a commercial arm, Lightyear.io in 2017.

Stellar works by issuing users with digital ‘token’ versions of their real-life currency. So, you might give $1 to the network and receive a token worth exactly one dollar. This token will then, in theory, be accepted anywhere in the world. Since the dollar itself doesn’t leave the bank account there’s no need for banks to get involved. Moreover, anyone in the world can buy and sell the value of a dollar without actually contending with the cost and frustration of the banking system.

The network was designed to supplement the existing financial system rather than replace it. While there is a native digital currency for the network — the Lumen (XLM) — it’s the ability of the Stellar network to trade using any currency, including other cryptocurrencies, that distinguishes it.

What determines the price of Lumen?

There are several factors at work in determining the price of XLM, but they are all fundamentally underpinned by the laws of supply and demand. The more than people want something, and the less of it there is, the higher the price they’ll be willing to pay.

Being an altcoin (that is, a cryptocurrency that isn’t Bitcoin), the price of Lumens is closely tied to that of the cryptocurrency market as a whole. Rises and falls in bitcoin tend to predict rises and falls in Lumens. Psychology matters, as ever — when it looks as though Bitcoin is going to achieve a significant milestone, like smashing through the $100,000 mark, then we might expect bullishness on the XLM front too.

The usefulness of XLM depends to a large extent on how much use the Stellar network is getting. If more users and organisations participate in the network then the XLM has greater value, which pushes up the price.

Stellar Lumens Price History

To get an idea of where the coin is likely to go in the future, it’s worth taking a look at where it’s been so far.

After the initial coin offering in 2014, XLM was priced at around $0.002, and fluctuated around this level until 2017. The coin’s all-time low is around $0.001.

In May 2017, the coin broke to $0.05 before slumping again back to $0.01. In December of that same year, of course, crypto was ascendent, and altcoins were borne upward as Bitcoin broke through the $10,000 barrier. This turned out to be the foot of a very steep hill, with gains of more than 50% being recorded overnight.

Two years of flatlining followed. In October 2019, the community voted to end the inflation mechanism, which had pumped up the supply by 1% annually until that point. In November 2019, the development foundation announced via a Medium post that it had decided to take the step of burning half of the supply of the currency. At the time, there were 105 billion Lumens, of which 20 billion were circulating, 17 billion were in the operating fund for the foundation, and 68 billion were marked for giveaways. It is this latter category that bore the brunt of a burning event; 50 of the 68 billion were burned, as were 5 of the 17 billion in the operating fund.

The market reacted fairly positively to this development, recording a sustained uptick.

In April 2021, the value of XLM shot up beyond the sixty-cent mark for the first time in its history. This comes after it having cleared the fifty-cent mark back in February of the same year. This protracted bear period comes on the heels of a two-year period of stagnation between January 2019 and December 2020.

Stellar Lumens Price Prediction

XLM price prediction is bound to be speculatory. If you are looking to invest in the currency then it is your responsibility to do your own research. After all, it’s you that’ll be taking the risk. In this case, there’s a non-negligible risk that the price might slump all the way down to zero.

Given that the currency has risen ahead of predictions, it’s possible that the Lumen will achieve parity with the dollar by the end of 2021. This is provided that the bear run currently sweeping the crypto world proves durable.

Further into the future, the price by the end of 2022 could go anywhere from $0.40 to $2.00 or even higher by the end of 2022. It’s difficult to say where the long-term limit for the currency’s value might fall; by the end of 2025, some predict that it might hit $5 or even higher — though others are more cautious.

Why is Stellar Lumens volatile?

Stellar Lumens shares characteristics with other cryptocurrencies, which lead to sudden and drastic change in value.

Unlike a fiat currency, which is controlled by governments and institutions to achieve certain economic objectives, the value of XLM is driven by market forces. It is perceived as a store of value.

In common with fiat currencies, on the other hand, is XLM’s vulnerability to unpalatable headlines and news events. If tomorrow we were to uncover a fatal flaw in the architecture of the Stellar network, we could be confident that many investors would look to sell, and thus the price would collapse. The same applies to security breaches and other forms of loss, which have a tendency to spook investors.

There is some uncertainty about what the future of the currency might hold. This is true for Bitcoin, and it’s certainly true for altcoins, too. The more uncertainty, the more volatility. Given that this is a smaller market with fewer players, it’s difficult for large players (or whales) to liquidate their positions without significantly moving the market.