Stellar (CCC:XLM-USD) is a fast-growing blockchain payments system whose goal is to ease global money transfers. But the success of XLM, also known as Lumens, will depend on how fast its payments platform can be adopted around the world. This may take a while, although recent events are now very promising.
XLM has had a momentous year so far in 2021. It closed last year a bit over 13 cents and short up fairly quickly in Q1 and early Q2 to a peak of just under 80 cents by May 15.
Most investors would have been wise to sell XLM by then, as with most other cryptos. In fact, this was a classic case of “Sell in May and go away,” as the saying goes.
The reason is it fell below 20 cents on July 19. Since then, in the past 3 months, XLM has risen to around 38 cents cents as of Oct. 20. Investors are starting to feel better about Stellar Lumens and its future. In fact, that means it is now up 188% year-to-date.
Where Things Stand With XLM
Stellar wants to reach the world’s “unbanked” and to allow money to move across borders more easily. The problem is it’s taking longer than hoped for the crypto to be adopted by national governments and enterprises.
One of the chief advantages it has for international transfers of money is its costs. Each Stellar Lumens transaction costs just 0.00001 XLM, the equivalent of 0.000038 cents per transaction. This is much cheaper than many international transfer transaction costs. They typically cost 1% or more.
As a result, XLM is gaining popularity and it now has a market capitalization of around $9 billion, according to CoinMarketCap. That also ranks it as the 22nd largest market cap in the crypto universe, putting it just behind Polygon (MATIC-USD).
The Stellar blockchain now claims to have many partners, according to Blockonomist. The list includes IBM (NYSE:IBM), Stripe, Franklin Templeton (NYSE:BEN) and many others.
Stellar Lumens also has a different governance and validation system than most proof-of-work blockchains like Bitcoin (CCC:BTC-USD). It uses “a federated system that uses mutual trust among groups of peers, or “quorums,” and scales this trust across the network to achieve consensus.”
The Moneygram Deal
On Oct. 6, Stellar Lumens achieved a major milestone. It signed a major international remittance company, MoneyGram International (NASDAQ:MGI) as a client. The Stellar Foundation signed an agreement that will allow it to develop a payments bridge that streamlines money transfers.
The platform will enable near-instant settlement in USD Coin (CCC:USDC-USD). USDC is a stablecoin pegged to the U.S. dollar developed by Circle, ranked the 10th largest crypto with a $32.2 billion market capitalization.
This is an important event for XLM. Here is what Denelle Dixon, the CEO of the Stellar Development Foundation, said about the deal:
“So this is just transformational in terms of being able to exchange crypto for fiat and fiat for crypto. We’re trying to go as big as we can.”
It is also unique in that a U.S. bank will be involved in the crypto and payment process. MoneyGram’s network will be integrated with the Stellar blockchain to settle the USDC transactions, and United Texas Bank will act as the settlement bank between Circle and MoneyGram. The CEO of Moneygram, Alex Holmes, said this about the Stellar deal:
“As crypto and digital currencies rise in prominence, we’re especially optimistic about the potential of stablecoins as a method to streamline cross-border payments.”
What To Do With XLM
If this Moneygram deal, proves successful, it could lead to other major remittance companies using the Stellar Lumens network. If they use XLM as a base platform for stablecoin transfers, it will also push the price much higher.
In effect, this could be a situation where XLM is now turning a corner. The blockchain might be at the point where it is seen as a successful low-cost blockchain money transfer system. If so, XLM will move substantially higher from here.
On the date of publication, Mark R. Hake did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
