Understanding the Impact of Supply Inflation on Stellar Lumens (XLM)
Supply inflation can significantly affect cryptocurrency investments, and having a grasp of tokenomics is crucial for investors. One cryptocurrency that experiences high inflation is Stellar Lumens (XLM), and it’s worth exploring its effects from a different perspective. By examining leading indexes and using demand as a benchmark, we can calculate the potential trading price of XLM if it ever reaches Stellar’s all-time high market cap.
XLM reached its peak price of $0.9381 per token on January 4, 2018, with a market capitalization of $17.554 billion and an estimated circulating supply of 18.712 billion XLM.
Interestingly, Stellar has surpassed this market cap twice since then, but at lower prices. On June 16, 2020, it reached an all-time high market cap of $18.385 billion. In May 2021, the market cap was $18.366 billion, with prices not exceeding $0.6661 per token.
The Supply Inflation and Economic Effects of Stellar Lumens
Let’s delve into the supply inflation of Stellar Lumens and its economic implications. Currently, Stellar has a circulating supply of 50.001 billion XLM, resulting in a supply inflation of 31.289 billion XLM (167%) over six years or approximately 27% annually. This inflation rate surpasses that of Solana and XRP.
The projected price also highlights the significant economic impact of this inflation. If Stellar were to reach its previous speculative demands, the price per token would be proportionally lower than the previous all-time high.
Based on the circulating supply on December 5th, the price would be around $0.3677 per token at its highest capitalization. This represents a decrease of $0.5704 (60.8%) from the peak price in 2018, with an even lower market cap.
However, even with this decrease, there is still potential for a 205% increase from the current price of $0.1202.
It’s important to note that this forecast assumes the same demand for Stellar as in previous years. There are no guarantees that this level of demand will be seen again. Additionally, it’s possible that higher demand may emerge in the coming years, which could be suppressed by the continuous supply inflation.
Hot Take: The Uncertain Future of Stellar Lumens
The high supply inflation of Stellar Lumens raises questions about its future prospects. While there is potential for significant growth from the current price, it relies on the same level of demand as in previous years. Whether this demand will materialize again remains uncertain.
As an investor, it’s crucial to consider both supply and demand dynamics when evaluating cryptocurrencies like XLM. Keeping a close eye on market trends and understanding tokenomics can provide you with an edge in navigating the volatile world of cryptocurrency investments.
Sources: Twitter
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