Launched in July 2014, Stellar is an open-source, decentralized blockchain protocol that allows for cross-border money transfers. It was built to serve the world's underbanked, with around 1.7 billion adults in this category around the globe.
Stellar Lumens (XLM) is the native token of the Stellar nework. Stellar makes cross-border transfers much faster and cheaper than existing systems, and it has been embraced by many financial platforms. This is reflected in the price of XLM, which increased by over 10x from 2020-2022. This piece will outline ways and strategies to invest in Stellar Lumens to ensure you don't miss out on potential returns in the future.
The following part will introduce you to four main ways you can invest in XLM. These are tried and tested methods that allow you to get your hands on these digital assets.
Before you buy XLM on an exchange, the first investment step to take is acquiring a crypto wallet where you can store your coins. Two types of wallets exist: software and hardware wallets. They differ in appearance, accessibility, and security. They help store your private keys, allowing you to stake a claim on a given bunch of tokens. Software wallets exist as websites, desktop programs, and mobile applications.
They are easily accessible and ideal for people that need to make regular transactions, as well as traders. However, they are less secure compared to hardware wallets since they are mostly connected to the internet. Popular examples of software wallets include Guarda, BitGo, MetaMask, Atomic Wallet, Exodus, and many others.
On the other hand, hardware wallets are physical devices that resemble USB flash drives. They hold applications that allow you to store your XLM safely offline. Only when you need to make a transfer can you connect them to your PC or mobile phone. They are very secure. They are ideal for long-term investors and people that hold large amounts of cryptocurrencies. Examples of popular hardware wallets include Ledger, KeepKey, Trezor, Corazon, and many others.
After acquiring a Stellar Lumens wallet, join a reputable Stellar Lumens exchange and register an account. Then complete the Know Your Customer (KYC) process by uploading a photo of your ID/passport, proof of residence, and a selfie. Secure the account by activating the 2-factor authentication (2FA) and add your funds. Now you are ready to make the initial purchase.
The second mode is buying fractions of XLM. This method is ideal for tokens whose value is a bit high and above the average trader's reach. With a coin like BTC trading above $35,000, buying a whole coin can be a step too far for a majority of retail investors. Therefore, it's great to know you can purchase fractions of a coin on an exchange. And with a solid investment plan, you can grow your portfolio slowly over time.
For coins such as XLM, however, with a maximum supply of 100 billion tokens, and a single token trading for under $1, buying fractions of a coin so cheap doesn't make sense. Even exchanges will have limits on the number of tokens you can purchase due to network fees and other fees involved. Therefore, on most platforms, it might be $10.
The third method is investing in XLM via a cryptocurrency broker. This is an excellent method for the investor that might find the process of purchasing and storing XLM too much to handle. Here you will not be dealing with the actual asset, which means there is no need for crypto wallets - storage is covered by the broker.
A broker will also allow you to trade financial instruments attached to XLM, such as contracts for difference (CFDs), which allow you to speculate on the price of Stellar. Some platforms also offer leverage, where you borrow extra capital from the broker, increasing your exposure within a given market. Using CFDs combined with leverage, you can speculate on slight XLM price movements, whether positive or negative, and make handsome returns.
The fourth way to invest in XLM is through an ETF. It's short for an exchange-traded fund, which is a financial instrument that tracks either a given asset, or a selection of several. One can purchase and sell an ETF on a stock exchange, which means that investments are secured by tight regulations.
A crypto ETF that contains multiple coins aims to spread risk. It's created and controlled by selecting a basket of different coins, emphasising those that have shown strong performance over the past. The logic is that even if certain coins in the basket don’t appreciate in value, the overall performance of the fund will still yield a profit.
A Stellar Lumens ETF makes sense to the investor that is interested in XLM but is also keen to manage the risks associated with the digital asset. ETFs offer a balanced risk-reward ratio, and protect cautious investors from scams. Participating in one is easy and requires visiting a stock exchange or a brokerage firm. ETFs can contain multiple types of assets, or solely crypto assets.
You have now learned about strategies you can employ to enter the XLM market, and you probably feel you are now ready to dive in. However, before you take that first step, there are a few things you need to consider. These will be covered below and can have a huge impact on your profitability.
Fees are common among service providers and represent how these platforms make their money. They might seem tiny but can add up, especially for frequent traders. There are several costs that are associated with cryptocurrencies, such as network fees, however in the case of Stellar these are very low, and usually negligible.
On broker platforms, you will incur commissions for trading, and if you go for a long time without using your account, you will incur inactivity fees. Additionally, depending on the payment method you choose to deposit and withdraw your funds, fees may be incurred. These fees vary between payment rails, and you will have to weigh which modes serve your needs best.
All financial instruments carry risks, and XLM is no exception. For starters, the crypto industry is scantly regulated, and this means there is no shortage of bad actors looking to take advantage of unsuspecting investors. This guide offers tips on how to protect yourself from malicious individuals, such as using regulated ETFs as an investment vehicle.
Some due diligence on your side can never hurt before entering any investment. At all costs, avoid investment schemes tied to XLM, especially the kind that promises to pay monthly commissions, or claims to guarantee astronomical returns with no risk.
A good investment platform should support numerous payment options for purchasing Stellar Lumens. You should be able to fund your account using credit/debit cards, bank transfers, third-party payments processors, e-wallets, and even other cryptocurrencies like Bitcoin.
Various payments methods have different attributes, and offer trade-offs between security, convenience, and cost. Assess your needs and choose an option accordingly: credit card companies offer great support in the event of a scam, whereas bank transfers usually have an extremely low cost. Third-party payment processors like Klarna offer some of the simplest entries into the crypto market.
The crypto market is now worth over $1 trillion, and it's on its way to more than doubling that figure. After more than ten years sitting on the periphery, crypto assets are edging their way into the public consciousness. This growth has been spurred by increased adoption by large institutional investors and powerful influencers who many look up to.
Stellar has been a solid project since the beginning, and has seen extensive real-world applications already. Speculators expect the XLM token to grow in value with time as the project partners with more and more traditional financial institutions, and brings financial services to the billions of underbanked individuals worldwide.
This piece is part of a series of guides whose goal is to educate the masses on making the most of the cryptocurrency market, and tokens such as Stellar Lumens. They offer opportunities that haven't been available to the wider public in the past, since typically traditional finance has excluded the vast majority of individuals. But it doesn't have to be this way. Cryptocurrencies came to empower the individual, and this can't be more accurate judging how projects like Stellar break down traditional barriers to entry. By implementing the methods and strategies shared here, you should be ready to make your first successful XLM investment.