What’s the forecast for the price of Stellar Lumens in the weeks and months ahead?
Stellar is a distributed payments platform that aims to connect banks, payments systems and people around the world, allowing them to move money across borders quickly, safely and with minimal fees. Lumens (XLM) are the native asset of the Stellar network and, at the time of writing on 2 March 2018, Lumens has become one of the world’s top 10 cryptocurrencies by market capitalization.
With ambitious plans and some big partnerships to its name, Stellar is a cryptocurrency project being watched with interest by many traders. However, Stellar faces stiff competition from crypto giant Ripple, and will also need to overcome some other key obstacles if it’s to achieve success.
So before deciding whether you should buy XLM, let’s take a look at the factors that could drive the growth or decline of this digital currency.
At the time of writing, the author has holdings in IOTA and XLM.
|Coin name||Stellar Lumens|
|Launch date||31 July 2014|
Stellar price prediction
Cryptocurrencies are complicated and volatile assets, and there are myriad factors that can have an impact on the value of any digital currency. If you’re thinking of buying Stellar Lumens, make sure you first consider the following:
What could drive Stellar’s growth?
- Decentralized. Unlike the centralized structure favoured by its biggest competitor, Ripple, Stellar runs an open ledger. This allows it to stick to one of the core principles of cryptocurrency: decentralization.
- Partnerships. Stellar has secured partnerships with several big players in the corporate world. Most notably, IBM is using Stellar’s network to develop cross-border payment systems with large banks. Other partners include finance and technology consulting firm Deloitte and payment processing provider Stripe. You can see a full list of partnerships on the Stellar website.
- Real-world use. With a focus on providing payment services to people in the third world and those living in poverty, Stellar has a potentially large market to tap into. For example, remittances to developing countries were expected to reach US$450 billion in 2017. Stellar already offers live payments between Europe and the Philippines, with plans to add Africa and the Middle East in 2018.
- Stellar.org. Also known as the Stellar Development Foundation, this nonprofit organization has a mission to “promote global financial access, literacy, and inclusion”. As well as developing and maintaining the Stellar network, its role is to promote the adoption of Stellar as a worldwide payment standard and distribute Lumens to expand the network’s reach.
- Lumen distribution. When the Stellar network was launched, 100 billion XLM were created. The Stellar Development Foundation is charged with ensuring that 95% of those Lumens are distributed to the world as follows: 50% to individuals who want Lumens, 25% to nonprofits to reach underserved populations and 20% to bitcoin holders. The remaining 5% are held by Stellar.org to cover operational costs.
- Potential Stripe integration. In January 2018, Stellar experienced a sharp price rise in response to the news that payment platform Stripe was considering incorporating XLM. “We may add support for Stellar (to which we provided seed funding) if substantive use continues to grow,” the Stripe statement read.
What could hold Stellar back?
- Market competition. Ripple (XRP) is Stellar’s main competitor and also a major player in the crypto world. It is one of the top five largest coins in the world by market cap, is backed by a big budget and has secured a number of corporate partnerships. Check out our guide to Stellar’s competitors below for more details on other projects to keep an eye on.
- Lack of mainstream adoption. One crucial factor that could negatively affect the price of Stellar is the lack of widespread adoption. If the Stellar network can achieve widespread use, then this could increase demand for XLM, but whether it achieves this goal or not remains to be seen.
- Poor performance of other coins. While it is possible to buy XLM with fiat currency, most crypto exchanges only allow you to obtain it using bitcoin (BTC) or Ether (ETH). As a result, XLM is closely tied to those two currencies and falls in their value could potentially impact the price of Stellar.
- Non-profit. Backed by the non-profit Stellar.org and with a stated mission to “connect people to low-cost financial services to fight poverty and maximize individual potential”, Stellar is less likely to see skyrocketing prices like those experienced by bitcoin in late 2017.
Where to buy Stellar
What’s coming up in Stellar’s roadmap?
A roadmap outlines the key milestones and developments a cryptocurrency project has planned for the future. These developments are key considerations you’ll need to take into account when assessing the potential growth or decline in a coin’s value. Let’s take a look at some of the important issues coming up on Stellar’s roadmap for 2018:
Stellar Decentralized Exchange (SDEX). This exchange will allow on-chain, protocol-level trades for any Stellar token. According to the roadmap, SDEX will include the following features:
- Day One trading for any Stellar ICO token
- Atomic pathfinding to discover the cheapest rates between any two assets
- Low trading fees
- User control of secret keys
- Lightning Network on Stellar. In response to a demand for more private transactions on the Stellar network, the project plans to integrate Lightning in 2018. This is designed to improve Stellar’s long-term security and scalability.
Stellar’s performance will also be influenced (either positive or negatively) by the performance of its competitors. The following cryptocurrency projects are competing with Stellar:
- Ripple (XRP). Stellar was actually created as a fork of Ripple in 2014. While the two currencies no longer share any common code, they both aim to provide instant, low-fee cross-border transactions. However, Ripple and Stellar seem to be focusing on different areas so far. While Stellar is focused on bringing financial services to people living in poverty, Ripple has concentrated on targeting major banks and other large financial institutions. For more information on the similarities and differences between Ripple and Stellar, check out our head-to-head comparison.
- OmiseGo (OMG). OmiseGo is an Ethereum-based platform designed to offer real-time, peer-to-peer exchange and payment services. It was also labelled “an ambitious and clever proposal” in the Stripe blog post that also mentioned the possibility of incorporating XLM in the future.
- Nano (XRB). Previously known as RaiBlocks, Nano is a digital currency designed to offer fast and free transactions as well as to be infinitely scalable.
- Bitcoin Cash (BCH). Formed in 2017 after a bitcoin hard fork, BCH is designed to offer faster and more affordable transactions than the world’s best-known cryptocurrency.
- Litecoin (LTC). Designed to offer faster and cheaper transactions than bitcoin, Litecoin is firmly established in the list of the top 10 cryptocurrencies by market capitalization.
Beyond 2019: What does the future hold for Stellar?
Looking to the future, it’s impossible to say with any certainty what the future holds for Stellar. Just like any other cryptocurrency, it is both complicated and at risk of volatility, while it also faces its own unique mix of challenges and opportunities in the times ahead.
Given its focus on developing markets, its major partnerships and its backing by the Stellar Foundation, Stellar appears to have solid foundations. If the successful development of the Stellar Decentralized Exchange is achieved as planned in 2018, it could also make the platform an attractive option for ICOs. In addition, the implementation of Lightning has the potential to address scalability issues for the foreseeable future.
However, like most other cryptocurrencies, a crucial stumbling block to Stellar’s growth could be its ability (or otherwise) to achieve widespread adoption. It’s here that its competition with Ripple will come to the fore. While the two projects are currently focused on different markets, their technology is looking to solve similar problems.
Where Stellar goes in the next couple of years will be fascinating to watch. While the Stellar network has plenty of potential, its main competitor Ripple is a major player with strong financial backing. It’s worth staying knowledgeable of developments from both projects, as well as news from the wider cryptocurrency world, to see how each is placed to tackle future challenges.
Before buying any XLM, make sure you research all of the factors that could affect the value of Lumens to decide whether they will be a worthwhile purchase.