Stellar Lumens Faces a Challenging Short-Term Outlook Despite Bullishness

Stellar Lumens (CCC:XLM-USD) is in free fall mode. The coin faces a significant hurdle of a 20-day moving average and is facing a sharp selloff from all-time highs achieved just a few months ago.

Image of a Stellar coin
Source: Stanslavs / Shutterstock.com

The price is below all the moving averages — from the 20-day to 200-day — that have been on a steady decline since the June 29 peak at $0.3012. That is when a death pattern emerged.

This is the crypto world we are talking about, and things can change on a dime. However, the XLM price is struggling under the 21-DMA barrier since the May 19 flash crash. The 14-day relative strength index (RSI) is also bearish as it moves into the oversold region while trending continuously below the 50.00 level.

Bears will next target the June 22 low of $0.1952. On the flip side, bulls need to push past the 20-day moving average line and try to target the 50-DMA resistance of $0.3229, which has proven stiff resistance.

Can Stellar Lumens Make a Comeback?

At its peak, Stellar Lumens was in the top 10 of the biggest cryptocurrencies in the world. However, that seems a long time ago, considering the recent steep drop.

Initially referred to as ‘The Secret Bitcoin Project’, XLM was created by Ripple co-founder Jed McCaleb. Stellar XLM is comprised of two key elements: its open-source, decentralized payment network, Stellar; and, XLM, the native currency of the Stellar platform.

Stellar’s main aim is to help financial institutions and individuals to create, send and trade digital representatives of all currencies. Considering McCaleb previously founded Ripple, it is not surprising Stellar and Ripple are focused on facilitating cross-border payments.

But there is a key difference. Ripple makes it easier for banks to transfer money without having to worry about exchange rates and fees. On the other hand, Stellar is positioning itself as a digital solution for people who want to make everyday payments. The Stellar Development Foundation, which owns the cryptocurrency, says that the main purpose of the claims its primary aim is to offer financial freedom to those with restricted access to reliable institutions.

For much of the world, that activity is facilitated by Western Union (NYSE:WU), which in May reported first-quarter results that showed a rebound in cross-border activity, particularly in remittances, done digitally.

Ultimately, the foundation hopes to create a worldwide network, meaning anyone can make an international payment in their own currency and reach the recipient in theirs, without the fees and slow transaction times traditionally associated with cross-border payments.

Each Stellar transaction costs just 0.0001 XLM in fees and takes less than six seconds to process. In addition, the total supply of XLM is set to increase by 1% every year. Stellar is an inflationary currency. In theory, this would have made it a lot more scalable than Bitcoin (CCC:BTC-USD), which is currently expected to reach its maximum supply around 2030.

Bullish Thesis

When you take a look at some of the analysts offering Stellar Lumens price predictions, you will see a pattern. Most are bullish in the long run.

For example, Captainaltcoin analysts believe that XLM coins could be worth $100+ by 2030. PrevisioniBitcoin predicts the altcoin to finish at $1.30 at the end of 2021 on account of mass adoption. TradingBeasts is also optimistic, predicting that Stellar could be worth $0.66 by the end of 2021.

Some might say these projections are a bit far fetched. However, Stellar has shown to double within a month, so it’s not out of the question XLM does not reach these predictions.

Invest To Hold for a Long Time

After a series of bearish years that defied the asset’s high profile partnerships, the outlook for XLM started to improve this year. But the current crypto crash has put a spanner in the works. There is a contrarian view regarding when and where you should put in your money.

At this point, it is better to have a long term perspective when it comes to these coins. The “crypto crash” of 2017 is firmly in our rearview mirror. Institutional money is well established and truly a part of the crypto world. So even though there will be hiccups, the overall story remains strong.

As I touched upon earlier, analysts focusing on the long-term outlook for XLM are bullish on its prospects. In the meantime, U.S. financial authorities are preparing to take a more active role in regulating the cryptocurrency market.

So any adverse headlines can and will affect your holdings. But if you have a long term outlook in mind, things will only get better from here.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


Article printed from InvestorPlace Media, https://investorplace.com/2021/07/stellar-lumens-faces-a-challenging-short-term-outlook-despite-bullishness/.

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