A Stellar Investment? - Issue #12

In this newsletter, we are profiling Stellar and a bit of Ripple. In previous newsletters, we have profiled Bitcoin, Ethereum, Litecoin, Polkadot and many others. Access all our newsletters in our archives at madcapx.substack.com.

The Short of It

Stellar and Ripple have created a lot of excitement for their followers over the years but are Ripple’s days numbered, and how does it affect Stellar if more lawsuits appear this year.


Portfolio

This portfolio section gives you an idea of what sort of return you can get when investing in cryptocurrencies. Over time, we will introduce other portfolios with different crypto assets.

  1. The BTC Hold continues to be higher once again, 202% since October 1st, 2020. Since this is a long term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long term hold position as our best stable alternative.

  2. The BTC/USD fund is up 139% since November 2nd. This past week bitcoin has been ranging between $29,900 and $41,950 USD in value. Once again, seeing a new all-time high this week.

  3. FUND 3 started on November 16, 2020, with $1000 USD in value and invested into BTC, LTC, ETH and ADA. The total amount of BTC value from the four coins has a gain of 4.4% since the start. Against USD, it is up 104% since the start. We will hold these positions to see how well it does against our BTC-only portfolios. LTC is -10.2% against BTC. ETH has gained 9.9% against BTC since the start. ADA is performing the best this past week, up 25.9% since the start against BTC.


Profiling

Launched in 2014 as an open-source version of Ripple (XRP), Stellar has the mission of creating equal access to the global financial system. Jed McCaleb, the founder of Mt. Gox and co-founder of Ripple, created the network system with former lawyer Joyce Kim. Stellar’s token, called the Lumen (XLM), is used for staking and payments for all services provided by the system. It is maintained by a non-profit organization called Stellar Development Foundation in collaboration with Stripe CEO Patrick Collison (who gave them $3 million in funding). The goal of the system is realized by facilitating transactions of digital representations of currencies, such as USD, EUR, BTC, etc., on their single blockchain.

The Stellar blockchain has a block time of just 5 seconds and can handle up to 1000 transactions per second. There is an annual fixed inflation rate of 1%.  Stellar does not have a smart contract language or built-in virtual machine to handle code execution. Instead, it relies on combining transactions with various constraints to achieve results similar to the most commonly desired smart contract functionality. To learn more about this, refer to https://www.stellar.org/developers/guides/walkthroughs/stellar-smart-contracts.html.

The consensus mechanism for transactions is called the Stellar Consensus Protocol (SCP) and is based on the Federated Byzantine Agreement.  Since this is not a proof-of-work algorithm and all the coins were created up-front, there is a detailed and transparent distribution policy which you can read about at https://www.stellar.org/foundation/mandate#Lumen_distribution.

In early 2017, a for-profit company called Lightyear.io was launched as their commercial arm.  Later that year, they announced a benefits program to award partners $2 million worth of XLM for project development.  In 2018, Lightyear.io acquired and merged with Chain Inc. to create a new entity called Interstellar.

Ripple (XRP), what Stellar is based on, was created as a means of using the blockchain for doing many fast transactions and aimed at usage by banks and other financial intermediaries.  RippleNet is a consortium of over 200 financial institutions based in more than 40 countries and, in this regard, is leading in adoption by major financial players. While it is a distributed ledger like other cryptocurrencies, it is not as decentralized, causing many to distrust them.

The U.S. Securities and Exchange Commission (SEC) has charged Ripple for conducting unregistered securities transactions, which they have been fighting for a long time. Most recently, many large exchanges have started suspending Ripple and some removing it altogether. Is Stellar susceptible to the same fate as they are so closely related? 

While XLM and XRP are both top cryptocurrencies, one is for banks and the other more community-focused.  If you are interested in investing in either of these, make sure you understand the risks.


Trends

Stellar on the weekly BTC chart was quite bearish from November 2018 till August 2019; it has been rather flat since then. Though the range from the bottom support to top resistance is 145% allowing traders to take advantage of the volatility.

Ripple [XRP] over the last 2+ years is continuing its march toward zero on the BTC chart. In November, XRP went up 175%, and in December, it went down 75% below where it had started. On December 21st, the news broke that Ripple is getting sued by the SEC, and it took a larger than normal crash. Was Ripple pumped exactly one month before getting sued to allow some to sell off?

It is amazing that there are so many fooled by the army of XRP evangelists like the one below. Yes, Ripple has stayed in the top 10 for many years, traders have made plenty of profits getting the right exit. Up to 2019, Ripple was pretty cyclical in nature and gave plenty of opportunities. But since then, it has not been a good investment, and the charts look terrible.

On the cryptocurrency dominance chart, XRP is only beaten out by ETH and BTC in the long term. In January 2021, it has fallen to 1% compared to 17% in May 2017. Is XRP in real trouble? Several investment firms have cut ties with them, such as Galaxy Digital, Grayscale, Jump Trading, Bitwise and many cryptocurrency exchanges. Could 2021 prove to turn out better?

Stellar seems to have more potential than XRP in the coming year. Here’s a list that “Stellar XLM Turkiye” put up on Twitter.


How will Strike Global affect altcoins such as XLM, EOS and ADA as layer-2 solutions on bitcoin become a reality?


YouTube video with Max Keiser giving his predictions on Bitcoin, Gold and Silver in 2021. All three are seeing all-time highs in 2021. Fiat and central banks will not do well with at least one of the central banks collapsing. Interesting to see how his predictions will pan out this year.


About

MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites. This weekly newsletter is a paid subscription and supports the team and the Madbyte projects. Subscribe for free and get a limited-time complimentary paid subscription and access to all our archives. The regular cost is $5/month or $50/year. Cancel anytime.


Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.