Much like electric vehicles, the cryptocurrency boom shows no signs of cooling. Look at Stellar Lumens (CCC:XLM-USD), for example.
With a market cap of $8.9 billion, the coin just rallied from an October low of 7 cents to a recent high of 45 cents. That’s all thanks to FOMO and booming interest from retail investors and institutions.
However, before you run out and empty your life savings into cryptocurrencies, be cautious. Many of these digital currencies are wildly overextended, including XLM, Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and Dogecoin (CCC:DOGE-USD). In fact, XLM is overextended on relative strength (RSI), moving average convergence divergence (MACD) and the Williams Percent Range (Williams’ %R.) The last few times these three indicators aligned in overbought territory, XLM pulled back.
The same could happen again soon, especially if XLM fails at double top resistance. In my opinion, don’t buy it just yet. Wait for it to pull back first.
What is Stellar Lumens?
Stellar is a decentralized protocol, designed to extract lightning fast and efficient payment protocols. That makes it possible for people to create, send and trade digital forms of money – dollars, pesos or Bitcoin. All designed so all the world’s financial systems can work together on a single network, according to the company’s website.
Typically, it’ll take a bank days to process large transactions, with high transaction fees.
However, with Stellar, the same tasks can be performed almost immediately at lower cost. It also allows for cross-border transactions between any currency. It only requires that users hold Lumens to transact on the network.
Also, consider this, according to InvestorPlace contributor Mark Putrino:
It is estimated that about three billion people don’t have access to banks or traditional banking services. They can’t get credit cards, wire money or have savings accounts. But more than half of these people have access to cellular phone services. A cryptocurrency could be a viable (and better) alternative to traditional banking for this market.
In short, we could be looking at a game changer here. The only issue right now is that XLM is technically stretched.
Big Money Is Flowing Into Cryptocurrencies
In the longer term, we could see higher highs in many popular cryptocurrencies, especially with big money flowing in. For example, Elon Musk’s Tesla (NASDAQ:TSLA) bought $1.5 billion worth of Bitcoin and could even accept the currency as payment.
There’s even speculation Apple (NASDAQ:AAPL) could buy in, too.
RBC Capital Markets, according to Reuters, has said Apple has an opportunity to offer a trading mechanism for cryptocurrencies. The firm notes that Square (NYSE:SQ) generate about $1.6 billion a quarter in Bitcoin revenue on a base of around 30 million.
“Apple’s install base is 1.5 billion, and even if we assume only 200 million users would transact, this is 6.66x larger than Square,” according to the report. “Therefore, the potential revenue opportunity would be in excess of $40 billion a year (15% incremental top-line opportunity),” as quoted by CoinDesk.
The Bottom Line on Stellar Lumens
The cryptocurrency boom is alive and well. There’s a good deal of institutional and retail interest. Tesla just took a massive $1.6 billion position. Bridgewater’s Ray Dalio says Bitcoin is “one hell of an invention.” BlackRock funds can now invest in cryptocurrencies. Even Apple is rumored to take a position in digital currency, too.
In the near term, the only thing that concerns me is how technically stretched most coins have become. Longer term, the story is only likely to heat up and send coins to higher highs.
All as retail investors and institutions just begin to push into cryptocurrencies. As I’ve noted with Ethereum, wait for the pullback before jumping on the bandwagon.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. A contributor to InvestorPlace.com, Ian Cooper has been analyzing stocks and options for web-based advisories since 1999.