Bitcoin and many other major cryptocurrencies get their value from their scarcity–when supply shrinks, the value should increase, the logic goes.
The bitcoin price, which some expect will rally next year following a cut to the mining reward supply known as a halving, has been treading water since suddenly leaping at the end of October.
Now, bitcoin rival Stellar, the tenth largest cryptocurrency by market capitalization, has suddenly soared after the Stellar Development Foundation “burned” over half the digital token’s supply–worth a staggering $4.7 billion.
“We didn’t start by wanting to burn. We started by asking, ‘what do we need,'” Stellar Development Foundation chief executive Denelle Dixon reportedly told the Stellar Meridian conference yesterday. “As much as we wanted to use the lumens that we held, it was very hard to get them into the market.”
After the announcement that the Stellar Development Foundation, the non-profit organization that supports the development of the stellar blockchain network, had burned 55 billion of its XLM tokens, the stellar price leaped by almost 20%–adding over $200 million dollars to the cryptocurrency’s total value.
“I don’t know [how the stella, bitcoin and wider cryptocurrency market will react], Dixon told bitcoin, blockchain and crypto industry news outlet Coindesk following the event.
“I really just don’t have a sense at all of what the market response is. From my standpoint, it’s how the ecosystem feels about it. We got a lot of positive response from the ecosystem because we are rightsizing what the foundation has and the foundation holds,” Dixon added.
The bitcoin price remained largely flat following the news, while other smaller tokens, including Ripple’s XRP rose slightly.
The Stellar Foundation now controls some 30 billion XLM, divided between development and operational funds.
“We [have] burned 5 billion lumens from our operating fund,” the Stellar Foundation wrote in a blog post.
“It now stands at 12 billion lumens. This reduction isn’t in any way a retreat from our mission. It’s an acknowledgement that we owe it to the ecosystem, to the network, and to ourselves, to be as efficient as possible in our work.”
As stellar isn’t created by miners in the same way as bitcoin and most other major cryptocurrencies, “the lumens now in public hands are there because we’ve worked hard to get them there over the last four years,” the Stellar Foundation wrote.