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Stellar Trading Insights
Stellar (XLM) completed a major architecture overhaul in March 2021. The client-facing API server for the Stellar (XLM) ecosystem, named Horizon was upgraded to Horizon 2.0. The developers wanted greater flexibility between Stellar Apps and Stellar Core. The crux of the new upgrade removes the need for a Stellar validator to interact with the blockchain. It effectively allows Horizon to be deployed with minimal resources, with fewer restrictions in play. The end result is greater flexibility for those developers using the Stellar ecosystem. Developers tend to flock to the Stellar blockchain en masse, particularly for apps, payment providers, asset issuers, and wallets. The direct interface between them and the Stellar Network + Stellar Core is Horizon 2.0.
This fully decentralised marketing technology utilises a virtual web of decentralised servers that distribute the ledger, and maintain logs of all transactions, and all network data. This distributed exchange allows for multi-currency transactions. The Stellar coin a.k.a. Lumens goes by the ticker XLM. It’s interesting since the absence of trading pairs does not preclude the ability to trade currencies within the Stellar network. Chain conversions are undertaken which ultimately get to the desired fiat currency. Between March 2020 and March 2021, several interesting developments took place with Stellar, driven largely by a sharp appreciation in demand. As a case in point Stellar was priced at $0.058 on March 4, 2020, and increased to $0.42 on March 4, 2021. Such price movements are not uncommon with cryptocurrency. In fact, this trend was evident across the board during that time. Led by the meteoric price rise of Bitcoin, multiple altcoins enjoyed similar upswings.
The growth in demand for low-cost and high-cost crypto options such as Stellar and Bitcoin respectively has been fuelled by an uptick in retail and institutional trader interest. South African traders, like their counterparts abroad, have taken to trading XLM in various forms. A relatively simple way to trade price movements in Stellar is available at AvaTrade SA through CFDs. Derivatives trading instruments such as CFDs present traders with an alternative option when seeking to generate returns from cryptocurrencies. Rather than relying on the linear option of price appreciation for ROI, traders can implement sound research and analysis and make educated forecasts. Provided the economics of these decision-making processes are sound trading calls can be made.
It is imperative that thorough fundamental and technical analysis is undertaken by way of economic indicators, charts, graphs, and patterns. Stellar enjoyed a strong run in early 2021, reaching #11 on the most capitalised cryptocurrencies in the world. With a circulating supply of 22.539 billion XLM, and a maximum total supply of 50 billion XLM, the market still has room for growth and expansion. Provided retail and institutional demand exists, Stellar has potential.
What is Stellar?
Stellar is an open-source, decentralised platform that connects banks, payments systems and people. It was designed to facilitate fast, low-cost and secure cross-border transactions. Stellar was founded by Jed McCaleb, a former co-founder of another popular cryptocurrency (Ripple), and by Joyce Kim, a former lawyer. Stellar was initially released on July 31st, 2014 and has always been supported by the non-profit, Stellar Development Foundation. This Foundation was created in collaboration with Stripe CEO, Patrick Collison, and the company received a2% or 2 billion of the initial stellars in return for its seed investment. AvaTrade is an industry-leading broker with some of the best crypto trading conditions available, including the lowest crypto spreads on the market.
From the start, Stellar had an impressive growth, achieving 3 million unique users by January 2015, and by April 2015, the Stellar Development Foundation upgraded the network to run on a new consensus algorithm, which went live in November of the same year. This new algorithm used a cryptocurrency protocol or SCP (Stellar Consensus Protocol), created by David Mazieres, a Stanford University professor. The Stellar network is based on blockchain technology. It is basically a decentralised network of servers that run distributed ledgers. The ledgers update every transaction, with each complete log available on every server. The servers communicate with each other, syncing the ledger every 2-5 seconds. This communication process is what is known as consensus.
To send payments on the Stellar network, you will have to be issued credit by Anchors. Anchors essentially act as a link between any particular currency and the Stellar network, and one will need to exchange debit for credit with an Anchor on the network. In exchange for your deposit, credit will be issued to your virtual wallet, which can be sent or received on the network between participants. A major benefit is that Stellar supports a distributed exchange model. This then allows a user to send a payment in a particular currency, such as USD, even though they may be holding EUR credit. The Stellar network will perform the forex conversion automatically at the best available rates. In addition, the recipient of the funds can then withdraw the funds through a partner institute, such as a bank.
Stellar and Lumens
Stellar has its native cryptocurrency called Lumens. It uses Lumens as the bridge currency (or cryptocoin) on its network. As the native asset on the Stellar network, Lumens (or XLM) serve two important functions: they facilitate seamless multi-currency transactions as well as discourage DoS attacks on the network by attaching a nominal fee of 0.00001 lumens on every transaction. DoS attacks are usually malicious attempts by unethical participants who may attempt to flood the network. All three terms, Stellar, Lumens and XLM, are used interchangeably, though Stellar is the blockchain network, Lumen is the cryptocurrency and XLM is its trading symbol.
XLM has generated investor attention because of real-world use cases of the Stellar network. In August 2014, Mercado Bitcoin, the first Brazilian Bitcoin exchange, announced it would be using the Stellar network and in 2016, Deloitte announced its integration with Stellar to build a cross-border payments application, Deloitte Digital Bank. Notably, since 2017, Stellar has had a long-running partnership with technology giant IBM. IBM has been using XLM for its real-world blockchain solutions, and the company even announced that it is not planning to release its own crypto token, which further cements the case for XLM being IBM’s token of choice for cross border payment solutions. In January 2018, Mobius Network ran its ICO (initial coin offering) on the Stellar network.
Like Ethereum, the Stellar platform also allows users to develop other decentralised apps (dApps) and tokens. There have also been other stablecoin projects, notably USD Anchor, which are fully backed by fiat currencies. Stablecoins facilitate easy fiat-to-crypto exchanges, and they also help to eliminate the volatility concern of cryptocoins. Naturally, all projects undertaken on the Stellar platform will boost the profile and appeal of XLM coins.
Advantages of Trading Cryptocoin CFDs with AvaTrade ZA
Cryptocoins are a lucrative financial asset class. Trading cryptocoins, such as XLM, with AvaTrade comes with the following advantages:
- AvaTrade ZA offers trading on cryptocurrency CFDs (contracts for difference). With CFDs, since you are merely speculating on the asset price and not actually purchasing cryptocurrencies; you do not need to worry about your cryptos being lost or stolen.
- With AvaTrade SA, you do not need to create a wallet in order to trade cryptocurrencies. This simplifies the trading process.
- When trading CFDs online, you can profit when markets are increasing and also when they are falling. Since you are only speculating on the asset price, you are not impacted by declining prices.
- AvaTrade ZA offers a secure trading environment. We are regulated via 8 authorities across 5 continents and our client funds are protected at all times.
- You can also trade cryptocurrencies with generous leverage, giving you more exposure to trade than your account balance. AvaTrade ZA offers up to 2:1 (for EU residents) and 25:1 (for non-EU residents) leverage.
- At AvaTrade ZA, we offer automated trading for convenience and flexibility. When you trade, you can preset profit and loss levels by using stop losses or take profit limits when you trade. Future orders like Buy Stops and Buy Limits are also available.
- Unlike many exchanges who restrict their clients to trade only crypto to crypto, the clients at AvaTrade are able to trade cryptos against a wide choice of fiat currencies such as USD, EUR, JPY and more.
At its launch in 2014, the Stellar network had 100 billion stellars. Stellar.org intended to distribute the initial 100 billion lumens as follows: 50% given away to individuals; 25% given away to partners who included governments, institutions, businesses and NGOs; 20% to Bitcoin and Ripple coin owners; and finally, 5% was reserved for the organisation’s operational expenses. The giveaway is extremely important for Stellar, as it allows the network to expand its reach as well as achieve a more inclusive digital economy. The Stellar network has an integrated fixed inflation mechanism, which sees new XLM coins added to the network at a rate of 1% per year. As well, funds raised from base fees on the network are added to the inflation pool.
As of January 2019, 8.65 billion Lumens had already been distributed, with the circulating supply standing at 19.16B. At the same time, the total supply of Lumens stood at 104.68 billion. XLM has had an interesting trading history. Its ICO was presented on August 1st, 2014 when it started at $0.15. The ICO raised $39 million. By the end of 2014, the XLM value had grown fivefold, and in May 2017, XLM spiked from $0.00547 to above $0.047 in just over 3 days. The subsequent cryptocurrency rally saw the XLM coin post its all-time high of $0.91 in January 2018. After that, it fell, alongside the entire crypto market, but it has been resilient enough to lose about 30% of its value when most cryptocoins have posted an average of about 90% losses. As of January 2019, XLM was trading at circa $0.08 with a market value of about $1.586 billion (~456,927 BTC).
Stellar is one of the few networks with on-going real-life use cases. Stellar’s near-zero fees have lowered the costs of remittances and even made it possible to make micropayments cheaply. Its real-time settlement of 2-5 seconds is a leader in the industry, while the company has also set the pace in international mobile money integration. Alongside IBM and Deloitte, Stellar also has huge working partnerships with Parkway Projects and TEMPO Money Transfer. As more partners are incorporated, XLM will likely attract even more demand.
Stellar Trading Information at AvaTrade ZA
- MT4 Symbol: _XLMUSD
- Trading Time: 24/7 GMT
- Typical spread: 2% over market
- Minimum Nominal Trade Size: 100
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Stellar Trading FAQ
- Where can I trade Stellar Lumens?
As one of the most popular cryptocurrencies there are literally dozens of cryptocurrency exchanges where Stellar Lumens are available for trading. However, with most of them you’ll first need Bitcoin or some other cryptocurrency to do your exchange. A much easier way to trade Stellar Lumens is to speculate on the price of the cryptocurrency using CFDs. If you take this course of action your trading will be simpler and more streamlined. And you can trade Stellar Lumens CFDs right here at AvaTrade. In fact, you could get started today by opening an account in minutes.
- Is Stellar Lumens a good cryptocurrency for traders?
As one of the top cryptocurrencies for some time Stellar Lumens has attracted a lot of investment, and it continues to see good trading volumes and liquidity on a daily basis. That makes the token a good choice for traders, who won’t have to worry so much about price gaps and illiquid situations. The coin is also fairly volatile on a daily basis, giving short-term traders plenty of opportunity to profit from the daily, and sometimes the hourly movements of Stellar Lumens. The best way to trade is through cryptocurrency CFDs and you can trade them right here at AvaTrade with ease.
- What’s the best strategy for trading Stellar Lumens?
Stellar Lumens tends to move up and down in fairly predictable waves, making a moving average crossover strategy suitable for trading this cryptocurrency. Of course, any cryptocurrency trading strategy should also include the use of CFDs. This just makes the trading easier, with far less to learn, and far less risk of losing your coins. It also allows the use of leverage, which can greatly enhance trading profits when used properly. Why not try your Stellar Lumens trading strategy today by trading on CFDs at AvaTrade?
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