Today I’m tasked with discussing Stellar Lumens (CCC:XLM-USD), the one-time cryptocurrency powerhouse that seems to have become irrelevant to investors over the summer.
What gives? Did Solana (CCC:SOL-USD) steal its thunder? Or, is there another explanation for its meteoric fall from grace?
I’ll examine these two questions.
Stellar Lumens Took Its Eye Off the Ball
I wrote about XLM-USD in mid-June. At the time, I argued that it needed to deliver something other than cheap money transfers if it wanted to gain mainstream acceptance.
It’s almost contrarian to think this way – what’s more utilitarian than money transfers? – I believe that investors continue to place their bets based on groundbreaking utility, not a blockchain version of existing money transfer protocols.
In this regard, Solana appears to provide it. Stellar Lumens doesn’t. Or, at least it doesn’t in the way investors want, need, or expect.
There is no question that Solana is on fire, up 57% over the past seven days through Aug. 31. It’s quietly snuck up to the eighth spot by market capitalization at $32 billion, 4x Stellar Lumens’ market cap.
In mid-June, XLM-USD was trading at precisely the same spot as it does today. Over this same time frame, SOL-USD has appreciated by 195%
In a Telegram chat with CoinDesk, crypto financial services firm Amber Group said that institutional demand for Solana increased in recent weeks. Money instead is going into Ethereum (CCC:ETH:USD) alternative coins, it said.
Angel investor Howard Lindzon speaks very highly of Solana, especially Phantom, a Solana wallet he uses. In his Aug. 24 blog post, he highlights some of the key pieces of Packy McCormick’s recent discussion about why Solana is so great.
“Technically, what makes Solana interesting is that its radically different system architecture leads to dramatically higher speeds and lower costs than other blockchains,” McCormick wrote on Aug. 23. “Whereas Bitcoin (CCC:BTC-USD) can handle about 7 transactions per second (TPS), and Ethereum can handle 30 TPS (until Eth 2.0 dramatically increases it), Solana can currently handle 65,000 TPS.”
He goes on to state Solana is so fast, “It feels like using the internet.”
Lindzon’s so right. You have got to read McCormick’s Solana Summer post. It really explains why the Solana ecosystem makes sense. That said, I’ll be honest, I’m still trying to wrap my arms around this whole thing.
However, Solana appears to be miles ahead of Stellar Lumens from a pure excitement and momentum point of view.
A Fall From Grace
I don’t know if it’s so much that Stellar Lumens has fallen from grace as it is that institutional investors have decided that Ripple’s (CCC:XRP-USD) focus on big banks and lowering the cost of its clients’ money transfers is a smarter approach than trying to win over the unbanked.
The best analogy would be the fisherman who throws out a net instead of a spear to hunt for their livelihood. One is far more productive, not to mention easier to execute.
As a result, Ripple has a market cap of almost 7x Stellar Lumens.
“At the end of May, I said partnerships like the one that Ripple formed with the National Bank of Egypt suggest that the currency has what it takes to become a leading cryptocurrency. As it stands today, it’s solidly in the third spot by market capitalization,” I wrote in June.
Outside the top 10, nothing has changed for Stellar Lumens over the past two months. It still needs to pull a rabbit out of its hat to move up in the market cap tables.
I think Solana absolutely stole Stellar Lumens’ thunder this summer. It’s going to be really tough to get it back.
While Cardano remains my favorite, Solana has definitely got my attention.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.