Stellar (XLM) has experienced a substantial increase in its price, rising by approximately 60% since the recent court ruling in favor of Ripple against the U.S. Securities and Exchange Commission (SEC) on July 13. Despite this growth, the token’s value remains around 20% lower than its previous peak of $0.195, currently trading at approximately $0.154 as of July 23.
This surge in XLM’s price coincides with its growing positive correlation with Ripple’s digital asset, XRP. The correlation coefficient between the two tokens currently stands at 0.95, indicating a near-perfect synchronization in their movements. This strong correlation is not surprising, considering Stellar was initiated as a separate blockchain payment project by Jed McCaleb, one of Ripple’s co-founders. Consequently, the price trends in both the XLM and XRP markets tend to mirror each other closely.
Potential Risks for XLM
Despite the recent price increase, XLM faces potential risks, particularly due to the potential decline in XRP’s value. Analysts predict that XRP’s price may drop by approximately 40% by September, which could also exert bearish pressure on XLM.
From a technical standpoint, the recent rally in XLM’s price has led to the weekly relative strength index (RSI) reaching its most overbought levels since April 2021. As of July 23, XLM’s weekly RSI stands at approximately 72.5. Additionally, the token faces a strong resistance confluence, represented by its 200-week exponential moving average (200-week EMA) and a horizontal line near the $0.164 mark.
These technical indicators suggest that XLM is likely to experience a significant price correction in the coming weeks. In such a bearish scenario, the price of XLM could decrease towards its 50-week EMA, which is situated around $0.111. This potential drop represents a decline of approximately 30% from its current value. It is worth noting that this support level aligns with XLM’s historical price movement between May and November 2022.
On the other hand, if XLM manages to overcome the resistance confluence and achieves a decisive close above it, the token may experience a rally towards the $0.22 mark by September. This upward movement would result in a significant increase of approximately 45% from its current price levels. Notably, this particular level has previously acted as both support and resistance during the period between June 2021 and April 2022.
Perplexity Surrounding XLM’s Future
The recent developments in the XLM market have left investors and analysts perplexed about its future trajectory. While the token has experienced a notable price increase, it remains vulnerable to potential market fluctuations, particularly in correlation to XRP. The upcoming months will likely provide more clarity regarding the price direction and overall performance of XLM.
Burstiness in the XLM Market
The XLM market has demonstrated burstiness, characterized by sudden and significant price movements. The recent surge in XLM’s price following Ripple’s legal victory exemplifies this burstiness. Investors and traders must remain vigilant and closely monitor market developments to capitalize on potential opportunities or mitigate risks in this dynamic and rapidly changing environment.