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Less Than Stellar: Why XLM Is Plunging While Bitcoin Booms

Last Updated March 4, 2021 2:37 PM
Greg Thomson
Last Updated March 4, 2021 2:37 PM

Since the turn of the year, Stellar (XLM) is the only major cryptocurrency not to have increased in price.

While that sinks in, bear in mind that most coins in and around the 12th ranked XLM have recorded anywhere between 100% and 1,100% growth during the same period.

So after a “stellar” year in 2018, which brought increased institutional adoption and major tech partnerships for the crypto project, why is Stellar now lagging behind?

The answer may be found in the question itself…

XLM’s Stellar Past

stellar cryptocurrency price vs bitcoin
Stellar outperformed Bitcoin over the past couple years, but it’s losing steam in 2019. | Source: CoinMarketCap

Casting an eye back to the final six months of 2018, Stellar regularly grabbed headlines by outperforming the rest of the crypto market. So much so, in fact, that while the rest of the market declined from summer to winter, XLM’s value actually increased.

The price increase was helped in no small part by a cavalcade of bullish news which made Stellar a sentimental favorite in 2018. Within the space of a few months, Stellar was picked up by IBM for use in its World Wire  cross-border payments platform; added to Circle’s list of investable digital assets; and officially teased by Coinbase  as one of the major coins they were considering listing.

This was accompanied by a fortuitous, but unfounded, rumor regarding Facebook’s utilization of Stellar  for use in its own proprietary blockchain. A flattering article by the New York Times placed Stellar creator Jed McCaleb among the ten people “leading the blockchain revolution.”  And Stellar was even adopted by UNICEF, as the aid organization expanded the list of currencies in which it could receive donations.

Roles Reversed in 2019

stellar cryptocurrency
Stellar investors aren’t having a great year. | Source: Shutterstock

Stellar’s growth in 2018 was such that at one point in July it overtook the 6th placed Litecoin  (LTC) in the market cap rankings. By September XLM had overtaken EOS  (EOS) in 5th place, and Stellar’s status as a main feature of the market cap top 10 looked secure.

The coin’s propensity to subvert the natural order of the market can be seen in numerous headlines from the time:

Coinbase Anticipation Keeps XLM Afloat Amid Downturn

Stellar Price Holds Strong Amid Dip as IBM Contract Announced

Amid Downturn, Stellar Lumens Is Outperforming the Market

UNICEF and Goldman-Sachs Backed Investors Adopt Stellar; XLM Overtakes EOS

Yet here in July of 2019, XLM has fallen to No. 12 spot and is down over 9% against the dollar since January. That slight decline wouldn’t be so bad were it not for the fact that all of XLM’s peers have grown in that time. This can be seen no more clearly than in XLM’s performance against Bitcoin since January, with XLM falling a staggering 69%.

stellar price vs bitcoin price
Stellar has plunged 69% against Bitcoin in just six full months. | Source: CoinMarketCap

Market Equilibrium, and No New Hands

The idea that the crypto market still has a tendency to “even out” is backed up by analogous situations regarding Ripple (XRP) and Waves (WAVES). Like Stellar, both XRP and Waves had excellent ends to 2018, with Waves in particular more than quadrupling in November-December.

Now, also like Stellar, XRP and Waves have stagnated in 2019, as the cryptocurrency market seeks to find some kind of equilibrium. (XRP gained just 8% since January, while Waves lost over 40%.)

If that explanation is too abstract, then consider this: the kind of people who would buy Stellar…already have. Despite the fact that XLM coins dropped to a price of $0.07 in December, no new hands came in to scoop up those bargain prices.

This again might be a sign of XLM paying the cost for previous success. While many crypto assets lost close to 99% of their value, XLM only dropped by 92%, perhaps causing buyers to anticipate further losses.

In short, the XLM price at the end of the year already had the previously mentioned partnerships, adoption, and hype factored in. Even Stellar’s adoption as a stablecoin maker for 2 million EU customers and businesses  this April struggled to move the needle.

Stellar hasn’t necessarily lost any of its shine – and only a little of its value – since the turn of the year. But it hasn’t gained much either.