Cryptocurrencies

Stellar Lumens (XLM)- Worth Buying Into?

As life re-enters the cryptosphere, its time to dust off a few projects and examine whether they provide an investment opportunity. If you have been into crypto for any period of time, you are likely aware of Stellar. It has just rebranded, ditching the ‘oh so 2017’ rocket logo for a more abstract, professional design. Given the rebrand, it seemed high-time to delve back into Stellar.

The Charts

Let’s have a look at the Stellar charts.

All-Time Chart

https://coinmarketcap.com/currencies/stellar/

Looking at the complete chart a couple of things leap out. Stellar is about to retest BTC resistance going back to June 2017. Breaking through or being rejected at this level will tell a lot about short-term price movement. We may also discern a decoupling from its USD valuation. In dollar terms, XLM has lost a lot more value than against BTC.

3 Month Chart

https://coinmarketcap.com/currencies/stellar/

Looking at the 3-month chart we can see that XLM may have bottomed out in early February but we can also clearly see that it was rejected at the local high from late January. In recent days, price has traded sideways then popped on the IBM announcement.

The Top 10

https://coincheckup.com/

Comparing Stellar to its direct competitors we can see that though it has rallied substantially in the last month, it has lagged behind most of the rest of the top cryptos over a 3 month period. However, with the marked exception of Binance Coin (BNB), it has substantially out-performed all its competitors when it comes to retention of BTC valuation; being 53% down from its ATH Bitcoin price point. Compare this to 68% for Ripple and 77% for Ethereum.


The Bullish Case for Stellar

Long established coin with a clear use-case and comparatively mature network. – Essential to institutional interest.

A founder with a track record of success – again and again, Jed McCaleb has demonstrated the ability to drive project success.
Location, location, location – being a long-standing member of the top ten attracts interest and capital.
Perception of good value – should a bull run erupt less sophisticated investors may see the low unit price as cheap.
Relative strength to Bitcoin – few other major crypto projects have demonstrated such resiliency.
IBM partnership may be a major driver of token utility.

Caveats

None of this is compelling. The chart offers a glimpse of opportunity – no more.
Banks show no inclination to adopt XLM.
Where’s the buzz? – I can’t find any, aside from the recent IBM announcement.
Jed McCaleb is too dominant and therefore a potential weak point in the long-term outlook for the project.
The potential returns are somewhat limited by supply and already elevated valuation. This is not a good ‘moon’ investment (though it is much more likely to be around in 5 years than 90% of its competitors).

Investment Thesis

I have already purchased XLM on a number of occasions:

Aug 2017 at 0.00000427 BTC – mostly sold off buying the bear market. Remainder still in nice profit.
Sept 2018 at 0.0000316 BTC – down approximately 10%
Feb 2019 at 0.0000237 BTC – up approximately 20%
Price currently sits at 0.0000284
On a break above 0.0003170 BTC (Daily candle opening and closing above this level). I will enter another position increasing my holding by 25%.

Exit Plan – Up or Down

Sell 75% of XLM position on a retest of May 2018 highs approximately 0.000048 BTC.
The remainder left as a longterm investment looking for new ATH over a multi-year horizon.
If price falls below the recent lows of 0.000021 BTC Sell 66% of current holdings.

The Final Word

A tepid endorsement. Stellar is a solid project with sound fundamentals. It is also lacking that X-factor and therefore not a project of primary focus going forward.


In Review – What is Stellar? / The Key Features of Stellar

It is a decentralized and open database.
Short confirmation time: 3-8 seconds.
It can process more than a thousand transactions per second.
Uses the Stellar Consensus Protocol.
Stellar is smart contract and multi-signature enabled.
It has a range of significant partnerships.

A long-format review of Stellar on which this post is based may be found on Trybe.

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