Stellar (XLM) experienced a huge 20% pump this week after some bullish news from the Stellar Foundation.
Overall, the cryptocurrency seems to be recovering from its late-September bottom of $0.05.
Will Stellar Lumens fully recover and surpass its yearly high? Or will XLM continue its long-term trend to the downside?
Let’s take a look at the chart.
During the week, XLM pumped from about $0.07 to close to $0.09. The cryptocurrency has since experienced a correction back to around $0.075 and is now trading between its 50-day and 200-day EMAs.
Stellar’s price spiked as a result of an unexpected token burn carried out by the Stellar Foundation. 55 billion XLM tokens were destroyed in the burn – or around 50% of the circulating supply.
Price was edging higher over October and has now broken some important levels. Looking at the volume profile, the next resistance point should be between $0.08 and $0.083. If this level is broken, the next resistance levels are between $0.12 and $0.13.
While XLM had been underperforming against most other coins in the cryptocurrency market, the trend now seems to have reversed.
The death cross, confirmed in late July when the 20-day EMA crossed both the 50-day and 200-day EMAs to the downside, is still in effect for Stellar. But despite this, the market seems to be looking for new highs.
Last week I said it was wise to patiently wait and see what happens, but now I believe the time for action is here. Two confirmations are quite good enough for me to make new entries.
Moreover, I personally expect the price of Bitcoin to rise during November, which could also change the mood of investors towards altcoins. If that is the case, then I see XLM breaking past the resistance levels around $0.09 and going on to $0.10 and $0.12.
For now, enjoy the buying opportunity – just don’t forget price can be quite moody.
Latest Stellar news
There has been some movement within the Stellar community over the past few weeks as the new protocol update 12 approaches.
The most recent version of the protocol will incorporate important upgrades to make the network more robust. It includes a somewhat controversial proposal: to terminate inflation.
This would mean fewer XLM would be minted and distributed to the current Stellar Lumens holders.
There are two main reasons why the Stellar foundation is proposing the change:
- Inflation isn’t benefiting projects building on Stellar, as most users simply join pools to receive and hold the newly minted XLM without giving it away to projects, for example.
- Inflation will lead to scalability issues in the future, as the greater the network is, the more drag inflation pools will have on the network, making it effectively slower.
If Stellar is able to stop inflation, a move that I believe the community does support, we could see the price of the token starting to rise in accordance with an increase in its stock-to-flow ratio.
About Stellar Lumens
Stellar was founded in 2014 by Jed McCaleb and Joyce Kim. At launch, it was based on the Ripple protocol, but the network eventually forked. Stellar is an open source protocol for exchanging money where servers use the internet to connect to and communicate with other Stellar servers, forming a global value exchange network.
Stellar Lumens is one of the largest cryptocurrencies and is one of the top 10 cryptocurrencies by market capitalisation