April 6, 2022

How to Invest in Stellar XLM

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Wondering whether Stellar Lumens is a good investment? Discover three reasons why Stellar may have a bright future, and how you can invest in it.

XLM is a promising cryptocurrency that may change the way we exchange money worldwide.

But how can you be sure it's a good investment?

Before you decide whether to invest, review this guide on Stellar (XLM) to learn more about its value propositions and risks. Read on to discover whether Stellar is the right cryptocurrency for you.

What is Stellar (XLM)?

Stellar Lumens (XLM) is a blockchain-based payment network that allows for low-fee, cross-border transactions between any pair of currencies.

Stellar is often compared to Ripple (XRP), but there are important differences between the two. The biggest difference is that Ripple is largely geared toward helping banks transfer money, while Stellar caters to individuals. That said, Stellar and Ripple do share the same creator: Jed McCaleb.

The Stellar Network, which is the name for the actual decentralized peer-to-peer payment framework, was created in 2014. Lumens (XLM) is the native token used on the network itself.

Stellar's biggest appeal is that it lets users trade, send, and convert all forms of money. It is a decentralized, open network and handles millions of transactions each day.

Though it does rely on blockchain, the official Stellar website describes the network as being "more like cash" since Stellar is faster, cheaper, and more energy-efficient than typical blockchain-based systems.

Why Invest in Stellar (XLM)?

So why invest in Stellar as opposed to other cryptocurrencies? Here are three bullish factors for Stellar Lumens (XLM):

1. The Most Practical Digital Currency

Bitcoin or Ethereum transactions aren't exactly most practical.

For example, Ethereum has infamously high gas fees, which makes it impractical for smaller transactions. Most cryptocurrencies are difficult to use as an actual form of payment.

Stellar aims to change all that. Combining low fees, decentralization, and speed, it's one of the only cryptocurrencies that could possibly compete with payment giants like Visa, Mastercard, and PayPal in the future.

This could cause Stellar to see major use and adoption in the long term, as people look to make daily transactions without having to go through the mainstream banking system.

There is also a relatively large global population with no access to the current banking system at all. This is a major demographic for whom Stellar would be extremely valuable, especially if these people wish to transact or save in something other than their native currency - which is another feature Stellar enables.

2. World Class Management & Long-Term Focus

The management behind any investment can make or break its success. And luckily, Stellar has one of the best management teams in the entire crypto space.

With the ongoing lawsuit Ripple is facing, Stellar founder Jed McCaleb has made it very clear that he's willing to work with regulators in order to make his projects a long-term success.

Stellar's team understands that regulation can be a good thing for the cryptocurrency space, as it would provide greater transparency and make more people feel comfortable participating.

Overall, McCaleb and the Stellar team have made it clear they're committed to the long-term success of Stellar, and they're willing to work with regulators to help integrate it into the current financial ecosystem.

3. Smart Contract Capabilities

Like Ethereum and Cardano, Stellar is engaged in the race to further improve its smart contract platform in 2022.

Currently, Ethereum is the market leader in the smart contract space. But high gas fees on the network make contracts and transactions unappealing for the average user.

Stellar's reputation for speed, security, and low fees could be massively disruptive if applied to the world of smart contracts. As the Stellar Development foundation wrote in a recent blog:

Smart contracts aren't new, but the way we could execute them on Stellar, learning from what's been tested in the broader industry, could bring new utility in a way that doesn't currently exist. That's why we're pursuing them.[1]

If they're successful in disrupting Ethereum as the smart contract market leader, it would mean major gains for Stellar in terms of user adoption.

How to Invest in Stellar (XLM)

Stellar is one of the most popular cryptocurrencies and available on most exchanges. However, not all exchanges are created equal. Many have security issues or charge exorbitant fees. Here are some of the best exchanges for investing in Stellar (XLM):

eToro
XLM is available for purchase on eToro, a popular exchange for its focus on social trading. Buying XLM on eToro is simple:

  1. Sign up for an account on the eToro website.
  2. Verify your account with a valid U.S. passport, driver's license, or state ID.
  3. Fund your account (minimum deposit is currently $200).
  4. Visit the XLM page and click "Trade".

Binance
You can now buy XLM on Binance, the world's biggest crypto exchange (by volume). Binance is known for its low fees.

To buy Stellar on Binance:

  1. Sign up for an account on Binance's website or app. (download: App Store, Google Play)
  2. Follow the instructions in their confirmation email to confirm your account.
  3. Visit XLM's page and click "Buy".

Crypto.com
XLM is also available for direct purchase on Crypto.com. You can buy it in just four easy steps:

  1. Sign up for an Exchange account on their website.
  2. Verify your account by clicking "Connect to Exchange" in the email they send to you.
  3. Deposit fiat or cryptocurrency to fund your account.
  4. Visit the XLM page and click "Buy XLM".

If you've invested in XLM, you'll next want to ensure that it is stored securely. Review your best options in the section below.

What Does It Cost to Buy Stellar (XLM)?

Most exchanges charge fees, which is how they make money. But you should still be selective when it comes to choosing an exchange to avoid being egregious fees.

Here are some of the fees you may encounter when buying Stellar:

  • Spread: This is the difference between the sell and buy price, often used by "commission-free" exchanges as a way of profiting from a transaction without disclosing it. Some exchanges charge it on both buy and sell transactions, others only once. This cost is sometimes hidden and may be unlisted by the exchange. Consider looking to crypto forums for potential spread fees.

  • Deposit Fees: Typically exchanges offer a variety of deposit methods. Sometimes they're free, others may be extremely expensive. Common deposit methods include ACH Bank Transfer and Wire Transfer.

  • Transaction Fees: These are often charged by the exchange to cover the cost of trading.

  • Debit / Credit Purchase Fee: Many exchanges charge more for these purchase methods than others.

  • Withdrawal Fees: Many exchanges charge you for withdrawals. Prices vary depending on the withdrawal method.

  • Inactivity or Maintenance Fees: These are fairly uncommon on exchanges. These are fees charged for having an account, or having but not using one, usually for 12 months.

Remember, these fees vary by exchange, so make sure to do your due diligence on the fee system of whichever exchange you choose to use.

Where to Store XLM Safely

After you invest in XLM, you must decide where to store it. Your options are either to leave your XLM on the exchange, or to transfer it to a digital wallet or hardware wallet.

In general: Storing crypto in exchanges is more liquid, but less secure.

  • If you're looking to just make a trade and profit in the short term, it may be easier to simply leave your XLM on the exchange.
  • If you want more security or plan to hold your XLM for the long haul, it's best practice to store it on a wallet.

Several popular wallets support XLM, including Atomic Wallet and Exodus Wallet.

Those who want maximum security often choose to store their XLM on an external, cold storage wallet like the Ledger Nano S or X, or the Trezor wallet.

Is Stellar (XLM) Worth the Risk?

In the case of Stellar, the biggest risk it faces is regulatory. Stellar's "cousin" cryptocurrency, Ripple XRP, is currently involved in litigation with the SEC, so there is precedent for regulatory risk with these currencies.

If you're going to invest in XLM, just be aware that it wouldn't be out of the question for Stellar to face similar legal headwinds in the short term.

Remember: Every investment, especially cryptocurrency, carries some risk. Keep this in mind before you decide to invest.

Bottom Line

XLM is a unique cryptocurrency that seemingly does it all. It allows for currency conversion and transfers, global payments, and is even working on smart contract solutions.

As an alternative to centralized payment processors and banks, Stellar may have a bright future. That said, Stellar does face risks of regulatory headwinds.

Investors must do their own research to decide whether an investment in Stellar suits their own goals and their risk portfolio.

References

Write to Corbin Buff at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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