The Stellar Lumens (CCC:XLM-USD) coin, XLM, called Lumens, is up 267% so far this year, even though it is down 8% in the last one month. Stellar Lumens ended 2020 at 13.24 cents per token. As of May 20, it is still up at 48.57 cents. This is despite having fallen 38.5% off of its peak of 79 cents. So, it is worth looking at as an alternative to Bitcoin (CCC:BTC-USD).
Stellar Lumens is a payments system blockchain platform. It’s designed to ease global money transfers. In 2017, Stellar Lumens started working with the government of Ukraine to develop a national digital currency. If it succeeds, it could be a stellar event for Stellar Lumens.
History and Features
Stellar Lumens was founded by Jed McCaleb in 2014. He founded Mt. Gox and was a co-founder of Ripple (CCC:XRP-USD). Originally, he started it as an open-source protocol for exchanging money or tokens. The goal was to reach the world’s “unbanked” and to allow money to move across borders more easily. Furthermore, he wanted to eliminate many of the steps that the present high-cost money transfer system requires.
Success will depend on how well its payment system platform will be adopted around the world. So far, that’s been limited. It may take longer than most people may want to wait for the Stellar Lumens platform to be adopted by national governments and enterprises.
One success is that the Stellar Foundation has partnered with blockchain forensics firm Elliptic. The Stellar platform screens transactions for money laundering risks, compliance, sanctions and more. Elliptic received a $5 million investment from Wells Fargo (NYSE:WFC) in early February 2020. Its focus is to assist banks in detecting unlawful crypto transactions.
Another feature of Stellar Lumens is that it has a maximum supply of 50 billion lumens. Presently, according to CoinMarketCap.com, there are 23.13 billion lumens circulating, or just 46.27%. So it is not going to have a squeeze effect like Bitcoin has at its 89% supply-to-cap ratio.
Despite its present drop during the past month, XLM still has an $11.2 billion market capitalization. This high market value shows that the cryptocurrency has many believers in its value.
Recently, for example, the Stellar Development Fund indicated that the number of Stellar addresses grew 11% during Q1. These addresses could be created, for example, from people doing money transfers using the Stellar platform. Or it could come from people storing XLM tokens in their digital wallets after buying it on an exchange.
What to Do With Stellar Lumens
Stellar Lumens is going through a downdraft, just like all other cryptos. One way to take advantage of this is to average cost into the crypto as it falls. All cryptos tend to be fairly volatile, and they seem to move in a high correlation. However, Stellar does not seem to have gotten hit as hard as some of the other more visible cryptos like Bitcoin and Ethereum (CCC:ETH-USD).
Recently, the Stellar network had a network outage, according to Coindesk. A number of “nodes” or server points of people who act as validators for the blockchain transactions were not able to gain access to the network.
However, the system survived, and the foundation has implemented a number of fixes. This shows the stability of the ongoing network. It also probably served to strengthen it against future issues like this, increasing the value of the XLM tokens.
I suspect that long-term holders of XLM will do quite well, despite declines like what is happening in May 2021. Serious long-term investors will take advantage of this and average cost their holdings. For example, I have a rule that I wait for a 20% decline in any particular holding before I average into my original cost. This allows me to lower my long-term cost. Investors in XLM who bought recently might be at that point now.
On the date of publication, Mark R. Hake held a long position in Bitcoin (BTC) and Ethereum (ETH). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.