Warning: The coming Stellar Lumens (XLM) price collapse (and how to profit from it)

in #cryptocurrency3 years ago

stellar.jpg

June 27, 2017 is the date to remember. That's when stellar is going to unleash 16 billion new lumens (XLM) on the market. Right now, there are 9,539,458,446 XLM in the wild. Another 16 billion will bring the total to 35,539,458,446.

It's dilution on a massive scale that will more than halve the value of your stellar holdings overnight.

Here's an example:

Let's say you're holding 100,000 XLM. At today's price of $0.029538, that makes your investment worth $2,953.

At the time of this writing, Stellar has a total market cap of $281,781,293.

When they dump another 16 billion XLM on the market, the price per stellar will (conservatively) drop to $0.007929 ($281,781,293/35,539,458,446 XLM = $0.007929). Suddenly, your $2,953 investment is worth $792.90.

And that's assuming the $281 million market cap for XLM doesn't fall. My expectation is that XLM's market cap will shrivel further in the days after the dilution. That's because you're going to have lots of sellers and not a whole lot of buyers. This problem will be exaggerated by the method stellar's using to distribute the new coins (by giving it to bitcoin holders). My guess is the majority of those bitcoin holders will claim their XLM for the sole purpose of selling it.

Look for a drastic drop in XLM after June 27. The price could rise quickly after a sudden plunge, but it'll likely be months or years before we see stellar at its current levels again. For XLM to hit $0.029538 after the dilution, the coin's market cap will need to be around $1 billion (35,539,458,446 XLM x $0.029538 = $1,049,764,523).

If you're holding XLM, I'd look to reduce your position until after the dilution. To get the most of the dilution, consider buying bitcoin. Here are two reasons why:

  • Bitcoin (btc, xbt) could see a price bump as people look to capitalize on getting free lumens
  • If you do buy bitcoin, you'll be able to claim free lumens (as they're distributing it to people holding bitcoin on June 26, 2017)

If you like stellar's development philosophy/business model, I'd stick with bitcoin and ripple (xrp) in the near-term.

Happy trading, all!

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As stated by other comments already. Your math is wrong. The total amount would be 25,539,458,446 - and only if every single XMR is actually claimed!

By the way, I created this counter for the Stellar Lumens airdrop snapshot:

https://www.tickcounter.com/countdown/193941/stellar-lumens-airdrop

Indeed. This is the most retarded maths I've ever seen. Not only is the amount supposedly being airdropped totally wrong, the total supply is also wrong.

FairX is a new exchange backed by IBM that looks to, I assume, make it easier for the common man to buy cryptocurrency. Note that I said cryptocurrency, and not Bitcoin. Right now, a lot of the crypto-exchanges are a complete mess – there's really no easy way for the common man to buy coins outside of what's on Coinbase.

Wow, 8 months later and $0.90 so if you had 100000 of them you would now have, $90,000 instead of $2900. I am glad someone told me about Lumens so I could buy them at .15, then again at .35 when I had some ETH profits I wanted to roll in. Assisting the underbanked is a noble and soon to be lucrative business. The 4 billion people with cell phones who don't have banking services are not somehow inferior to the rest of us, they have been deliberately disenfranchised by the powers that be.
XRP is the innovation the banks should have brought to us 20 years ago since money was their business. Now I would rather have a currency from IBM than from JPMorgan, because IBM is a company that creates actual value, as opposed to one that wants to charge us for counting our money. We can count our own damn money.

Great point about IBM and JP Morgan. IBM are a global solutions provider and partner with thousands of clients/organisations around the world mostly to make trade easier. Buy and hold XLM is more likely a better play.

Your math is wrong.

9,539,458,446 XLM plus 16 billion does not make 35,539,458,446.

9 plus 16 does not equal 35.

EXACTLY!!!!

Still diluted though, but not by near as much as the article implies.

Thanks, guys! I obviously wrote this way too quickly... I'll take more care in the future. It also looks like the dilution didn't matter. The crypto market has exploded since I wrote this article.

Thanks for this heads up.. I do hold Stellar.

You are completely wrong! As yesterday proves that Stellar is stable.

You need to own 10 bitcoins to claim 1,911 lumens, or $72 at today's prices. My guess is bitcoin holders will just hold on to rather than sell, what's the point at that price? This giveaway has been know about for some time. Perhaps it's is already priced in. A similar giveaway was carried out last year between July and October, the price was more or less static during that time. Perhaps some bitcoin holders will not even bother to claim. Things are different this time however. I'm guessing a lot more people know of Stellar now than last year. And that'll mean more people are likely to claim. I foresee a distribution resulting in a rally in price rather than a depression myself, perhaps not unlike the recent rally. The next couple of months will not be boring, that's for sure.

You bring up some good points. The scale of this giveaway is far larger (6x larger) than their last giveaway, though, and it will increase the number of lumens on the market by 200%. That's a huge dilution. Mathematically, we'd need another $1 billion to flow into lumens for the duration of the giveaway in order for the price to stay the same. That's not out of the realm of possibility, but it seems prudent to just lighten your exposure to lumens. Why take the risk when you can hold bitcoin instead and then claim even more lumens?

Forgot to mention that you're right, the price wasn't impacted all that much by the last giveaway... I think it's hard to compare them, though, since Stellar's market cap was around $10 million back then. That's peanuts compared to $438 million today.

Too many unknowns. What if I were to place all Stellar in Bitcoin only to find SegWit for Bitcoin (before September) is not activated in the Stellar giveaway period? But this is short term thinking.

For me Stellar and Ripple are going to compete and there's room for both. Nevertheless, if Stellar is successful if releasing all but 5% of their coinage then they'll effectively become a decentralised version of Ripple. This may well attract banks. For Ripple wants to be the banks partner for as long as the are in control of distribution. I don't think banks would put themselves in that position if they had to.

Thanks for the heads up... I always believe the potential and autonomy of Stellar compared with Ripple. It is the network of my favorite exchange here in the Philippines which is coins.ph. Although it appears at the moment as a second rate coin to Ripple because of Ripple's reputation, market cap and major banks tie up. But Stellar will most likely go as big if not bigger than Ripple. When you have extra, now is the best time to buy stellar....

Wow that beats everything! I was a late XLM investor and didn't know anything about this giveaway until now. What a crappy campaign - instead of rewarding their XLM holders, these one get nothing but an ass-kick and most likely the dump-of-their-life - while BTC holders make a haul and jig due to their free present. I can imagine that many late investors buyed XLM but still don't know anything about this little "surprise" at June 27th.

Sell it while you still can, the price is dropping hard as we speak.

I dont have 10BTC, do I need to worry :) Just incase XLM dumps, I'll just buy the dip.

Appreciate the research

You're naive to think that 16B XLM will be given away.

I've seen giveaways that pay off way better than this, with less than 250,000 BTC signed up. That's less than 2% of all BTC.

Why do you think this will be much different?

There will be lots of unclaimed lumens, but those are going to "be allocated to the Stellar operational fund and the Build Challenge." Stellar could easily sell those coins to bolster its balance sheet. I think with recent moves in crypto, more people are going to be paying attention to this giveaway.

Epic fail, nothing happend

Those holding through exchanges such as Kraken or Poloniex will not have to verify their location via Facebook which is kind of cool.

I'm a bit torn at the moment, not having any XLM (STR on Poloniex). Either way I'll be keeping on eye on this and the upcoming EOS.

Thanks for keeping the conversation moving!

I was given 5 XLM in Bittrex today. I do not know why or how I got XLM today, 2017, July 29th, Saturday. Maybe the Bittrex website gave me 5 XLM to me for free or randomly or somebody sent it to me or maybe I did it. But I do not think I did. So, why do I have XLM?

I got a bunch of them, too. I figured I'd hold them. Idk...

Maybe for same reason 0.02 LTC just showed up in my account... no idea!

Hang on to your Stellar Lumens or you will be sorry. Same with Ripple. Bitcoin Cash won't last much longer, it will go up and down a bit more but finally settle and won't move that much. Next year Ethereum will bypass the value of Bitcoin. How do I know this? I just do.

Good points in this blog. I was about to start a similair discussion. The price of a coin should depend on the quality of the product, the team behind it, if proffesional investors believe in it, and a lot more facets. I found this amazing platform: https://www.coincheckup.com Every single coin can be analysed here based on: the team, the product, advisors, community, the business and the business model and much more. On: https://www.coincheckup.com/coins/Stellar Lumens#analysis To check Stellar Lumens Indepth analysis

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haha... you were dead wrong about your analysis. At least you tried though...

Yep, credit for putting some thought into it. But predicting anything in crypto 8 months prior is like peeing in the wind.....

This could not have ended up more wrong.

well this date has come and gone and the price has risen...it has done the oppposite...also bitcoin price dropped...so what has happened?

@bavarianprinz I'm not sure what you are looking at. On June 24th, the price of XLM was 0.0401398 and on July 12th the price was 0.01440648. This represents a loss of nearly 64% of its value and it still has not recovered. You either cannot read a chart or your math is really really bad!

I think the market probably priced in the new coins before the distribution, it's already down to 1100s from 1700s.

it appears the price will not be affected rapidly as the coin supply is increased slowly, not all at once as previously thought.

I think that dispersing more coins to more people will also increase brand awareness of this currency also???

I think that it will cause a price decrease in the short-term, but in the long-term, a larger marketcap will come with higher brand awareness. And then in the medium term, there will be a lot of opportunity of price raises.

IT WILL DUMP THE MARKET ONLY