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