Become knowledgeable about the pros and cons of investing in Stellar that would push you ahead to understand if it is a good idea to invest in Stellar.
Stellar may be the only digital asset that is not present in your portfolio of investments. In this article, we are going to take an extensive look at why you may consider investing in Stellar, the pros and cons, and the significant factors which would serve as a guide towards your decision.
Before deciding on investing in Stellar, you must have a comprehensive insight as to what you are getting yourself into. Investing in Stellar based on recommendations from social media feeds automatically puts you on a sinking path towards making irrecoverable losses.
To begin with, Stellar is not the normal cryptocurrency. Instead, it is backed by a unique technological solution which is different from the other type of digital currencies on the market.
Unlike Litecoin (LTC), Bitcoin (BTC), Dogecoin (DOGE), and Dash (DASH) which uses its basic layer to settle financial transactions, Stellar is an improved payment protocol with a primary aim of disrupting the traditional ways of operations by centralized financial institutions as well as payment systems.
While such a unique innovation presents the digital asset as a great financial instrument for investments in the future, you must cover all aspects of the cryptocurrency and the technology behind it. What is Stellar, what does it do, what are the negatives associated with the digital asset? All these must be taken into perspective because no digital asset is perfect.
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- What is Stellar?
- The Pros of Investing in Stellar
- The Cons of Investing in Stellar
- How to Invest in Stellar
- Conclusion - So, Is Stellar a Good Investment?
- Will Stellar be a Millionaire-Maker?
What is Stellar?
Stellar is normally written as Stellar Lumens. Created by Jed McCaleb and Joyce Kim in 2014, Stellar Lumens is a cryptocurrency and blockchain network. In simple terms, Stellar is the blockchain and Lumen is the cryptocurrency that is denoted by the ticker symbol (XLM) used on cryptocurrency exchanges and brokerages for trading. Stellar is a blockchain network that serves as an open-source distributed payment system that facilitates financial transactions between payment services, banks, and individuals.
Stellar exists as three separate but interconnected technological systems.
- The Stellar Network is a digital payment network that settles financial transactions.
- Stellar Development Foundation is a non-profit organization in Delaware that supports the network and cryptocurrency.
- XLM is the novel token of Stellar which powers its network.
The idea behind Stellar is to make it possible for the creation, sending, and trading of digital representations of all forms of money, cryptocurrency (Bitcoin, Lumen, Litecoin), and fiat currency (Euro, dollar, and pounds) among others.
Due to the old financial payment systems being outmoded, there are several fragmentations and complications associated with its usage. Stellar has been designed to come into the system to enable all the global financial networks to function on a single network. The old technology employed by mainstream financial corporations is extremely unreliable and is time inefficient. This results in overpayments of transaction costs and delays in confirmation by receivers of funds.
Stellar offers a unique platform that facilitates cross-border payments and also allows currency exchanging, trading systems, and other applications to run on its blockchain. This brings extensive mileage to Stellar when compared to the several limitations associated with the old traditional payment systems.
In the six years of Stellar, it has been able to forge successful partnerships which have made its blockchain one of the best technologies for piloting and building several projects.
Due to its swiftness in processing transactions, several banks such as ICICI bank and other financial payment systems such as TransferTo did not only show interest but employs Stellar’s technology in its daily operations.
Aside from these institutions, more than 100 financial corporations are using the software solutions with the number growing substantially monthly due to several partnerships worldwide.
Some of the biggest names which have adopted Stellar include International Business Machine Corporation (IBM) and one of the best four accounting firms in the world, Deloitte.
After Stellar forged a new partnership with Ukraine to experiment with the creation of national digital currencies, there are whispers several countries may opt for Stellar as the software solution of their choice for the creation of CBDCs.
There are several experienced software engineers, crypto, and financial experts who share the view that Stellar could replace SWIFT as the primary network for reliable, standardized, and secure payments. Since Stellar uses Stellar Consensus Protocol, its authentication process is relatively faster than several networks.
This is the main reason why Adam Hayes of Investopedia opined that “This shortened approval cycle allows the Stellar Network to process transactions faster and keep transaction costs lower.” This means that transactions can be completed in a timely and efficient manner.
To help provide an insightful guide that would keep you informed as to your next investment decision, let us delve into the pros and cons of investing in Stellar.
If you want a qualitative analysis about the pros and cons of investing in Stellar so that you can conclude if it’s a good idea to invest in XLM, then you are at the right trading and investing website.
Read Also: Is Stellar Lumen a Good Investment?
The Pros of Investing in Stellar
What are the benefits of investing in Stellar?
A quick visitation to several crypto finance portals and there are bullish forecasts about the future of Stellar (XLM). Most of the analysts see XLM as an attractive investment for novice and experienced traders and investors. Let us dive into the positives which can answer the question, is XLM a good investment?
âœ… Improved Trade Volume
Trading Volume is one of the most disregarded technical parameters by novice investors. Knowing how much investors are trading is significant in alerting you to activity on a particular asset.
A rising market generally tends to have a rising volume. Stellar Lumens (XLM) has had increasing trading volume in May. This shows there is extensive interest in the cryptocurrency. XLM ended 29th April 2021 at $879 million and increased slightly to $1.49 billion to close out the month.
In May, XLM has increased proportionally reaching new highs of $0.78 on Monday, 10th May 2021. Some of the trading volumes recorded in May in no particular order in terms of the day are $2.06 billion, $3.02 billion, $4.50 billion, $4.88 billion, and $6.72 billion. This shows the huge interest traders and investors have in the asset.
According to the Economic Times of India, “Long-investors, especially institutional investors like mutual funds, usually avoid stocks that don’t have sufficient traded volume.” With this quote under perspective, long-term holders of XLM are holding onto their assets with a firm belief that it would go up. That is why there have been consistent improvements in the activity of the cryptocurrency.
âœ… Free of Cases with Regulatory Bodies
Despite having a strong relation with Ripple, Stellar has steered clear of any case with any regulatory body. Jed McCaleb is the co-founder of Ripple as well as co-founder of Stellar. This is the main reason why Stellar and Ripple have lots of similarities and few differences. So far, activity on XRP has not done anything to XLM as it has remained independent in terms of commanding a price on its own, not as a fork of first-mover of cross-border payments. A lack of controversy or regulatory case brightens up the future of the technology company and reflects positively in its valuation.
âœ… Stellar Consensus Protocol Is Relatively Faster Than Other Algorithms
One of the hallmarks of Stellar is to significantly reduce transaction costs and time lags associated with blockchain technology. At the time of writing, the average transaction costs for Stellar is $0.000078.
Since transaction costs are normally linked to how fast a network processes transactions, Stellar upgraded its network in 2014 to become an open-source system, and this resulted in the Stellar Consensus Protocol (SCP).
Under this protocol which is different from proof-of-work and proof of stake, the authentication process for confirming transactions is confined to a particular group of trustworthy nodes rather than making it available to the whole network of nodes. This reduced cycle of approval makes it possible for Stellar to carry out transactions in a relatively faster manner which results in low costs of transactions.
Since the launch of the Stellar Network in 2015, it has processed over 450 million transactions by more than 5 million individual accounts. According to Stellar’s official website, it processes millions of transactions each day. Other sources claim it is capable of processing approximately 1,000 to 5,000 transactions per second (TPS).
Multiple partnerships which have come to Stellar have been attributed to its relatively faster scalable feature. With more financial institutions opting for new and improved ways of processing transactions, more liquidity would be poured into XLM through partnerships. Simply because it’s the novel token which powers the blockchain’s network.
âœ… Improved Daily Use Rates
Stellar processes millions of transactions daily. As of Wednesday, 12th May 2021, the number of transaction counts on XLM stood at 2.51 million which is worth $636.60 million. This is extremely impressive for a cryptocurrency that is not integrated on millions of merchants online to be used as an option of payment. This should communicate to you as a trader or investor that investing in Stellar is worth your consideration since millions of people interact with the digital asset daily.
Check Out: Could Stellar Be A Millionaire-Maker Coin?
âœ… Stellar Is Branching Into the Future of Centralized Finance
As a result of possibilities associated with Stellar’s blockchain, the company behind the development and adoption of the network for usage has branched into Central Bank Digital Currency (CBDC). CBDCs are viewed as the next big financial disruptor according to banks on Wall Street.
CBDCs are leading discussions in Digital Money 2.0. Led by countries with large economies such as China and small economies such as the Bahamas, digital currencies are drawing enormous interest as the global world flirts with the idea of a cashless society.
On Monday, 4th January 2021, the team behind the promotion and development of the technology, Stellar Development Foundation announced a partnership with the government of Ukraine. Ukraine looks forward to taking the lead in terms of CBDCs in Eastern Europe and signed a memorandum of understanding to facilitate the process. The Stellar Consensus Protocol played a huge role in notching this partnership.
This puts Stellar ahead of Ripple, Ethereum, and other smart chains which aim to revolutionize the financial world. With a first-mover advantage, Stellar can notch more partnerships from several central banks across the world. Since XLM is the main currency on the network, extensive mileage on the digital asset as a payment method or usage in providing some form of liquidity to support transactions would reflect positively on the market capitalization of the cryptocurrency.
âœ… XLM is Extremely Accessible for Trading and Investing
One of the most trending questions online as a result of the crypto boom is where can I trade or invest in cryptocurrencies. Fortunately, XLM is among the most widely listed cryptocurrencies globally. It can be found on eToro, Huobi Global, CoinTiger, FTX, OKEx, and Binance.
These exchanges and brokerages record billions of dollars in trade volumes on listed assets which include XLM. Unsophisticated and sophisticated novice traders and investors would easily find the asset and take decisions on it.
Accessibility will help XLMs course in reaching certain price milestones in the future.
âœ… Stellar is Flirting with Decentralized Finance through Partnerships
Stellar has partnered with several well-established organizations such as IBM, Deloitte, TransferTo, Tempo Money Transfer, Flutterwave, and Coins.ph among a host of noteworthy names in the financial remittance space.
Since DeFi has taken the world by storm and has played a crucial role in the valuation of Ether (ETH), Cardano (ADA), and Tronix (TRX), XLMs partnership with Flare deserves great attention.
On 25th February 2021, Flare announced via a tweet, “Flare will be integrating $XLM as an F-Asset, bringing XLM to scalable smart contracts and a trustless gateway to #Stellar. Decentralization is far too important for maximalism. Ecosystems must be united.”
FLARE is a distributed network that has a diverse range of unique properties. Flare can be used to create two-way bridges between networks such as Ethereum and other ledgers. Flare’s partnership with Stellar means that users of XLM will be able to create XLM-backed tokens. The created tokens can be used with decentralized applications (DAPPS) on Ethereum such as decentralized lending platform Uniswap (UNI).
How would this be achieved? Through Flare Network’s F-Asset protocol, investors would be able to transform not only XLM but other cryptocurrencies it supports into bridge tokens.
It must be noted that the network of Stellar already supports native smart contracts. Stellar’s contracts feature is not compatible with the Ethereum Virtual Machine (EVM). This is where Flare comes in to overcome this limitation.
Usage of XLM in the creation of tokens coupled with exposure to decentralized finance could explain XLMs trade volume of $2.83 billion and huge activity on the currency in the last 24 hours.
âœ… Constant Upgrades to its Network
Stellar is constantly upgrading its network. An upgrade in 2014 resulted in the fast scaling Consensus Protocol. On Monday, 1st March 2021, Stellar announced via Twitter that Horizon 2.0 has been released.
This upgrade fully “Revamped the architecture of Horizon which is the client-facing API server for the Stellar ecosystem”. The major benefit of this is that there is more flexibility at the point where the Stellar Core and Stellar-based applications interact. Additionally, small developers and large organizations can deploy Horizon with fewer resources and under looser constraints.
This is in line with Stellar’s roadmap for 2021 where it aims to put more investment into the safety and resilience of the Core and Horizon on the network.
With several milestones in the process, Stellar would improve through its open-source feature and bring more innovative software solutions to the financial sector.
âœ… Substantial Increase of Volume on the Stellar Network
As a result of an upgrade in 2014, Stellar is an open-source blockchain. What this means is that aside from settling cross-border payments, it can also run smart contract applications. In its 1st quarter report, Stellar recorded significant growth across several sectors.
Overall total accounts grew by 10.73% after riding in the more than 4 million users tag for almost a year. Total payments on the network rose a staggering 160.49% while the volume of Stellar’s decentralized exchange (DEX) increased substantially by 196.26%. The total transactions processed rose 99.81% from 135,310,971 to 270,364,796.
Statistics on Relevant Assets running on the network informs people about the progress Stellar has made towards connecting global financial systems. The total number of relevant assets increased from 43 to 79 (83.7209%). The transaction volume of Relevant Assets rose by 2,798.47% (from $9,658,871 to $279,959,795).
This should inform you as an investor about the enormous usage of the network to facilitate large numbers of transactions that result in large volumes. XLM powers the network and sees more liquidity which defines its position as the 15th largest digital asset in the world.
âœ… XLM Has Scarcity Ahead In The Future
Scarcity plays an integral role in the determination of an asset’s price. Gold has been a haven for investors for centuries because it’s scarce. Stellar Lumens (XLM) currently has 23.10 billion in circulation from a max supply of 50 billion. An impressive 46% of the coins have been bought which leaves 54% on the market.
In the future, if the boom surrounding crypto does not die and the Stellar Development Foundation does not add more XLMs, Stellar could command a relatively higher price which would reflect the possibilities of its software solutions.
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The Cons of Investing in Stellar
âŒ What are the demerits of investing in stellar?
Looking at just the merits of an asset as a potential investment vehicle can lead you to lose most, if not all of your money. Let us take a brief look at the negatives you should take into consideration before deciding on investing in Stellar.
âŒ Faces Strong Competition from Ripple
Transaction validation for XLM is not the same as XRP. It is a known fact across the crypto stratosphere that Stellar is more decentralized than Ripple. With that said the two cross-border payment networks are all catering to centralized financial institutions.
Since Ripple with its XRP cryptocurrency is more centralized and has serviced 100s of financial institutions, potential customers may consider using Ripple’s software solutions in their day-to-day operations. This is because Ripple has a first-mover advantage as well as a long list of recommendations by other partners.
This is something Stellar is striving to catch up with. Perhaps, this could be the main reason why the Stellar Development Foundation facilitated the central bank digital currency agreement with the government of Ukraine in January 2021 to make a strong statement to the rest of the world.
âŒ Stellar Is Relatively Unpopular
Cryptocurrencies come with a ticker symbol. It is very easy for a novice investor to get to know that BTC means Bitcoin, LTC means Litecoin, ETH means Ethereum although the right name of the novel token is Ether.
XLM is a relatively unpopular currency and therefore is recognized by cryptocurrency enthusiasts with an extensive interest in the crypto finance space.
Although Ripple’s case with the Securities and Exchanges Commission (SEC) saw its price tumble in December, it has brought huge mileage to the cryptocurrency. XRP now commands a relatively higher price, daily trading volumes, and market capitalization which XLM can only be envious of.
Popularity is extremely essential to investors as it helps with the volume figures of an asset. A cryptocurrency like DOGE does not provide any innovative solution but currently records more daily volume and commands a relatively higher cap than XLM.
Stellar’s unpopularity may see trending digital assets across social media surpass its price valuation in the future.
âŒ Too Much Focus on Growing Network, Not On Advancing Cryptocurrency
The developers of Stellar are interested in forging lucrative partnerships with well-established financial institutions. This does not bode well for its novel token.
This is the main reason why XLM remains unpopular among thousands of traders and investors. It is not impossible but it is extremely difficult to find information about XLM being integrated to be used as an option of payment.
As Dash (DASH), Bitcoin, Litecoin, and Bitcoin Cash gain global exposure through its daily usage as a transactional currency, XLM is used on the Stellar Network as well as the creation of XLM-backed token to be used on smart contract applications on Ethereum.
XLM could benefit from being listed on online retail outlets as an option of payment. Too much focus on the network could see the cryptocurrency suffer in the future as DOT, LINK, EOS, and NEO join the saturated market with huge exposure in the space.
âŒ Stellar Team Is Relatively Smaller When Compared With Others
As of the year ended 2020, Ripple has 548 employees. As of April 2021, Stellar Development Foundation has 90 employees. This gives direct rival Ripple a competitive advantage in terms of marketing, development, and adoption of the blockchain’s solution to provide answers to outmoded ways of going about day-to-day transactions.
âŒ Has Failed to Command a Valuation Which Merits Its Unique Features
It is extremely difficult to wrap your head around the fact that XLM reached its all-time high on 4th January 2018 at $0.9381. This means that it has been more than three years since XLM last tested the $0.9 region. At the same time, BTC and ETH have risen more than 1,000%.
This has raised questions among crypto experts and analysts about the potential of the asset to reach the $1, $5, and $10 price milestones. You can only hope that XLM would move up substantially in the future. For the time, it is trading for less than a cent and would need strong innovation to command the prices of BNB, DOT, and LINK among others.
âŒ Many Developers Are Not Interested in Working on the Stellar Blockchain
Many developers want to make huge gains from their applications. Stellar offers a relatively smaller transaction fee which could benefit developers. Unfortunately, Ethereum has the first-mover advantage which certifies it as the current smart contract of choice for developers.
Several developers are adding up decentralized lending, exchange, insurance, and yield aggregation to Ethereum. Ethereum's popularity enables them to reach a much wider audience and make great profits out of its innovation. This leaves Stellar as a technology with relatively unknown DAPPS which does little to contribute to driving its price.
âŒ There are No Mining Rewards to Draw More People to Its Digital Currency
XLM does not depend on mining so there are no mining rewards to draw traders and investors to the cryptocurrency.
Although this helps in terms of the energy consumption levels of the use of mining in blockchain technology, it takes XLM out of very essential discussions associated with cryptocurrencies on Reddit, Facebook, and Twitter.
Such groups could have driven the price of XLM. Currently, such a feature is non-existent and part of the reason why the digital asset is not that popular among novice investors.
âŒ Too Dependent on the Price Patterns of Bitcoin
Like other altcoins, Stellar has struggled to create a legacy of its own. Currently, ETH seems to be gaining some form of independence in comparison to BTC.
ETH and BTC can trade in different directions but XLM has not been able to achieve that. Any unhealthy news on Bitcoin automatically sinks into the price patterns of XLM.
On the evening of Wednesday, 12th May 2021, Elon Musk announced that “Tesla has suspended vehicle purchases using Bitcoin.” In less than 3 hours, BTC plunged by more than 13%. In the process, several digital assets including XLM dropped by more than 16%. With this news as supportive evidence, XLM may drop into extinction zones in the future if BTC reaches new high lows.
âŒ May Collapse Due to Strong Regulation
With its low price, XLM may be one of the first cryptocurrencies to go bust if a strong regulation should come in the future. It has struggled to gain consistency in the last 3 years and could plummet strongly in the future with several uncertainties miring the crypto finance space.
How to Invest in Stellar
There are numerous cryptocurrency exchanges and brokerages which could help you invest in Stellar. Among others, one of the reputable brokers we as an e-learning organization would like to recommend for you is eToro.
Kindly follow the steps below and buy your first XLMs.
The FIRST STEP is to sign up. Your full legal name, phone number, residential and email address must be provided.
The SECOND STEP is to verify your account. This is the standard procedure for all exchanges and brokerages. You’d be made to upload documents to confirm your identity.
The THIRD STEP is to deposit funds. Without money, you cannot buy your XLMs. Kindly deposit an amount of money that meets your investment budget.
The FOURTH STEP is to navigate the XLM page. Purchase the number of XLMs you want and it would be processed and stored in your account.
Conclusion - So, Is Stellar a Good Investment?
As an investor, you must note that all forms of Stellar investment come down to two factors that are mostly ignored. They are risk and reward. When you are about to decide on Stellar XLM asset you must ask yourself, do the potential rewards exceed the possible consequences of the risks?
Stellar has a lot of risk factors such as relying too much on movements of BTC, strong competition from Ripple as well as not being so popular. This puts it on the path which is miles behind the current price and valuation of digital currencies which came on the market a few years ago.
With that said, Stellar is gradually becoming more known to millions of people as a result of its partnerships, accessibility on cryptocurrency exchanges, and online payment wallets such as Skrill. SKRILL allows wallet holders to buy, sell and hold XLM for the long term.
The current price of Stellar ($0.603) is in the trading and investment budget of several novice investors. The price also presents an invaluable opportunity for experienced investors to use XLM as a hedge towards losses on other assets on their portfolio of investments.
To put it simply, Stellar is a less risky investment that has a lot of growth potential. It could become even less risky if you move out of the unsophisticated trader category. You can do fundamental and technical analysis research (sophisticated trader) on the currency to embolden you to make a great decision as to whether or not you should add XLM to your portfolio.
Previsioni Bitcoin foresees XLM trade for a coin at $0.85 by June and increases substantially to $1.64 by the end of 2021. With the price forecast of the crypto portal insight, perhaps now could be the time to buy Stellar and see where it could take you as per your investment goals.
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Will Stellar be a Millionaire-Maker?
Stellar could become a millionaire-maker in the future. This is due to its extensive partnerships with 100s of financial institutions, constant upgrades which increase the speed and flexibility of its network, increased volume of the stellar network as well as a great innovation in the future. With a finite cap that is destined for scarcity and a first-mover advantage, XLM could trade at certain price milestones which could bring gains that could set certain investors up as millionaires.
On a practical level, XLM could be a millionaire-maker when you take into consideration,
Its current trading price at purchase, percentage change, number of coins to be purchased and he forecasted price you intend the cryptocurrency to reach.
At $0.60, 100,000 XLMs would cost you $60,000. If XLM reaches a price of $10, you could become a millionaire. Your wallet would have 100,000 XLMs multiplied by $10, which equals $1 million.
Currently, no experts or analysts are forecasting a price of $10 for XLM in the future. XLM could become a millionaire-maker, but you would have to buy more and hope it reaches $1, $2, and $5 in the future.
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Will Stellar (XLM) Reach $1?
Experts at Digital Coin Price forecast Stellar to test $1 in 2022 and settle at $1.08 by the end of 2022. Analysts at Coin Price Forecast estimates Stellar (XLM) to test $1 in 2021 and settle at $1.18 by the end of 2021.
Stellar could test $1 in September 2021 and close the year with a trading price of $1.25, which is the forecast of Long Forecast.
What Will Stellar be worth in 2025?
According to experts at Digital Coin Price, Stellar could have a trading price of $1.88 by the end of 2025. Coin Price Forecasts think Stellar (XLM) could command a price of $2.96 in the middle of the year and close 2025 with a price of $2.72.
Experts at Long Forecast estimate Stellar Lumens to trade for a coin at $0.77 by the end of June 2025.
What Will XLM be worth in 10 years?
Experts at Coin Price Forecast believe Stellar (XLM) could exchange hands for $3.93 by the end of the first half of 2031. The expert further predicts a trading price of $4.09 to close out 2031.