- XLM, the native asset of the Stellar blockchain, gained over 100% in the last 24 hours
- XLM was launched into the cryptocurrency top 10, taking 9th place and surpassing LINK
- We explore some of the factors that could have contributed to XLM’s big run
Why did Stellar gain more than 100% in 24 hours?
Stellar is the talk of the town in the cryptocurrency community today, thanks to a massive surge in the price of its native asset XLM. The coin has gained an absolutely massive 120% in the last 24 hours, displaying a price spike that’s truly remarkable for a large-cap cryptocurrency.
XLM was rejected at the $0.20 level on December 17, 2020, and proceeded to drop all the way to $0.12 in the following days. Today, XLM smashed through both the $0.20 and $0.30 price levels in just a few short hours, and is now trading at its highest levels since mid-2018.
Thanks to today’s gains, XLM has re-entered the cryptocurrency top 10, and currently sits in 9th place. XLM displaced Binance Coin, which recently hit an all-time high above $40.
But why did Stellar gain over 100% in 24 hours? In the highly volatile cryptocurrency market, there doesn’t necessarily need to be any fundamental reason for massive price spikes. However, there are several things currently going in favor of Stellar that can at least partially explain its recent run. In this article, we will be touching on some of the potential resons behind XLM’s big rally.
1. The cryptocurrency market is in a full-blown bull run
The cryptocurrency market is in the middle of a bull run, and there’s plenty of bullish sentiment to go around. At the moment, cryptocurrency investors and traders don’t need much convincing to hop onto a cryptocurrency that’s performing well, and anyone who’s ever participated in the crypto markets will be familiar with the power of FOMO (fear of missing out).
The total cryptocurrency market cap has increased by around 66% in the last month alone, reaching new all-time highs and approaching the $1 trillion mark. Bitcoin is trading at nearly $35,000 and Ethereum just recently crossed the key $1,000 psychological price level. In this context, it’s not hard to imagine any particular cryptocurrency going on a huge run out of nowehere.
2. The Stellar Development Foundation recently partnered with Ukraine’s Ministry of Digital Transformation
Stellar had some pretty big news recently, as the Stellar Development Foundation announced that it partnered with Ukraine’s Ministry of Digital Transformation to work on Ukraine’s infrastructure for digital assets, as well as activities related to stablecoins and central bank digital currency (CBDC). This announcement led to a price spike in the XLM markets, which accelerated to a much larger run today.
It’s worth keeping in mind that the Stellar Development Foundation’s announcement of the partnership was quite vague and didn’t make clear whether the public Stellar blockchain will be used in its activities with the Ministry of Digital Transformation. For example, Ukraine’s central bank used a private version of the Stellar protocol to conduct a pilot program for the E-Hryvnia CBDC in 2019.
3. XLM lagged behind the cryptocurrency market after the SEC’s lawsuit against Ripple
XLM has long been considered as a cryptocurrency closely correlated with XRP. Often, a move happening in the XRP market would be at least partially mirrored in the XLM market afterwards.
One of the main reasons for this is that XRP and XLM share a lot of history. The Stellar project was launched in 2014 by Jed McCaleb and Joyce Kim. McCaleb was one of the original creators of XRP, but decided to part ways with Ripple in July of 2013. Initially, the Stellar protocol was based on the Ripple protocol, but the projects have diverged quite significantly over time.
Nevertheless, the correlation between XRP and XLM remained quite strong. After the SEC announced its lawsuit against Ripple on December 22 and alleged that XRP is a security, the price of XRP tanked. XLM also didn’t perform too well following the announcement of the lawsuit, although it did hold up much better than XRP.
So, it’s possible that XLM was underperforming the cryptocurrency market as a whole after December 22 due to traders selling their XLM to play the XRP/XLM correlation. This could have led to XLM being oversold, making it »due« for some positive price action.
Another possibility is that XRP holders could be converting their holdings to XLM, as the two cryptocurrencies still do have plenty of things in common.
4. The OCC’s interpretive letter on banks being allowed to use blockchain and stablecoins
The U.S. Office of the Comptroller of the Currency recently issued an interpretive letter saying that banks in the United States are allowed to conduct payments through blockchain networks and stablecoins. While Ethereum is currently dominating the stablecoin sector, Stellar is also targeting stablecoins as a major use case for its network, so the OCC’s interpretive letter was certainly a relevant positive development for the project. USD Coin, the second largest stablecoin on the market, is expected to be launched on the Stellar platform in Q1 2021.
If you’re interested in a technical analysis of the XLM market, check out the following article.
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