As crypto prices overall have remained strong, so has the price of Stellar Lumens (CCC:XLM-USD). The up-and-coming altcoin remains down from the 52-week highs it hit during its spike early last month.
But, holding steady at around 40 cents, continued interest in cryptocurrencies may help it hold onto the rest of its 2021 gains (up more than three-fold since Jan. 1).
But while near-term downside (barring another crypto correction) may be limited, what could fuel further gains in XLM? It’s gotten a fair amount of attention as of late. However, it remains far behind in popularity compared to Ethereum (CCC:ETH-USD), who some say is the altcoin that could one day supplant the leader of the crypto pack, Bitcoin (CCC:BTC-USD).
The issue is not one about its utility. As I broke it down previously, XLM could be highly useful when it comes to international funds remittance. But its use for this purpose has yet to become widespread. A larger factor with Stellar having yet to break out is its current lack of institutional interest.
That’s not to say the “smart money” is shunning it completely. It may waiting for it to become more ubiquitous before treating it as an investment, like it does with Bitcoin and are starting to do with Ethereum.
So, what does that mean for those buying today, in the hopes of another boost? It may take time, but this rising star could end up a long-term winner.
Stellar Lumens Remains at the Ground Floor
XLM may be making headlines now. But this altcoin has been around since 2014. It hit its all-time highs back during the last crypto bubble in early 2018, before falling significantly in the crash that occurred later that year.
However, since then, Stellar Lumens has become more than just an altcoin for retail speculators to gamble on. Like I mentioned above, there’s clear evidence of this crypto’s utility when it comes to cross-border fund remittance.
As the blockchain platform itself states on its website, foreign workers worldwide remit over $500 billion back home each year. Using traditional methods, these remittances are costly, with transfer costs of up to 15% per transaction. However, using Stellar’s blockchain-based network, high remittance fees could someday become a thing of the past.
So far, usage of this platform has yet to become widely used for cross-border payments. But, buying it now may allow you to get in on the ground floor, ahead of it gaining critical mass in the global funds remittance space. However, while the sky may be the limit for XLM, it may still be many steps away from rising the kinds of valuations the more popular cryptos currently command.
XLM Needs Institutional Acceptance
Unless you bought some Bitcoins back in its infancy, chances are you didn’t parlay a small investment in it into a fortune. Same goes for Ethereum, which since 2015 has gone from less than $1 to around $1,800. But, with Lumens (what the crypto itself is called, Stellar is the network it runs on), can this crypto also go from sub-$1 prices up to four figures?
As is the case with anything, it’s certainty possible XLM generates “to the moon” gains in the coming years. But don’t consider it a certainty. For Lumens to reach substantially higher prices, several things need to happen.
First, use of its platform needs to become more widespread. Second, and more importantly, the “smart money” needs to start taking it seriously. Bitcoin is, and will likely remain, the gold standard when it comes to this alternative asset class. Ethereum is gaining when it comes to institutional inflows. It’s basically become the silver to Bitcoin’s gold, with the possibility of it supplanting it as the most valuable crypto by market capitalization.
But XLM? It remains a more obscure crypto. Sure, it’s gotten interest from crypto specialists, like Greyscale Investments. But we’ve yet to see major Wall Street crypto investors allocate substantial capital into it. It took years for the “smart money” to flow into Bitcoin. Expect it to be a long time frame as well until it happens for this crypto as well.
Watch Out for Crypto Market Volatility
With the possibility of this altcoin becoming both a popular method to remit funds overseas, and a popular crypto among institutional investors, the future is still bright for XLM. However, it’s important to keep in mind that, while cryptos have remained strong, there’s still the possibility of another market correction.
Bottom line: any sort of sudden rush out of crypto could push this more thinly traded altcoin back down to prior price levels. But while it’s wise to exercise caution when buying it, Stellar Lumens remains one of the more solid altcoins out there.
On the date of publication, Thomas Niel held a long position in Bitcoin. He did not have (either directly or indirectly) positions in the other securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.