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How to Invest In Stellar Lumens In 2021

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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 2020-2021. 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. 

4 Ways to Invest in Stellar Lumens

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. 

1. Buy Stellar Lumens Through an Exchange 

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. 

Our Recommended Exchange

Below is a comprehensive list of some of the top cryptocurrency exchanges where you can purchase Stellar Lumens safely. These platforms can be accessed from anywhere on earth and support various payment modes that simplify the process. 

1
Min. Deposit
$50
Exclusive promotion
Our score
10
Accepts customers from the USA
Offers 15 crypto coins to buy&sell including BTC, LTC, ETC, NEO and more
Trade on the world's leading social trading and investing platform
Start Trading
Payment Methods:
Wire Transfer, Bank Transfer
Full Regulations:
CySEC, FCA

2. Buy Fractions of Stellar Lumens Through an Exchange

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 $50,000, 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 about $0.4, 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. That gets you at least 40 XLM at the current price.

3. Trade Stellar Lumens Through a Broker

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. 

Our Recommended Broker

Below is a list of the most reputable brokers that allow you to invest in XLM with ease. They are highly regulated and secure, meaning your investment is safe on the platforms.

1
Min. Deposit
$50
Exclusive promotion
Our score
10
Accepts customers from the USA
Offers 15 crypto coins to buy&sell including BTC, LTC, ETC, NEO and more
Trade on the world's leading social trading and investing platform
Start Trading
Description:
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Payment Methods
Wire Transfer, Bank Transfer
Full regulations list:
CySEC, FCA

4. Invest In a Stellar Lumens ETF

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, emphasizing 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.

5 Stellar Lumens Investment Strategies

The section above has introduced us to four unique ways of investing in XLM. The part that follows will educate us on five wise strategies that will ensure you make the most of investing in Stellar Lumens. 

1. Buy and 'Hodl'

What is it?

The first strategy is buying and holding. The term ‘hodl’ is simply ‘hold’ spelled incorrectly, and is one of the many crypto neologisms that exist today. This strategy is the simplest by far: you visit a cryptocurrency exchange, sign up, fund your account, and buy XLM. Then you transfer these tokens to your private wallet. Hold on to these tokens for years and watch as their value grows.  

In 2015, one XLM token cost $0.0005. If you had bought XLM then, and held it until now, you would have seen 800x returns. If you believe Stellar will be used widely in the future, then this is a great strategy to gain exposure before the world catches up. 

What is the benefit of using this strategy?

This strategy is suitable for the long-term investor, someone who possesses patience and is a true believer in the Stellar Lumens project. This individual doesn't have to worry about the daily price fluctuations of the token, and can see large profits further down the line with minimal effort.

2. Day Trading

What is it?

This strategy involves buying and selling XLM tokens quickly, within hours, minutes, or even seconds. The goal is to capitalise on market volatility, which is endemic to the crypto space. This is possible on an exchange or brokerage that will automatically match ‘buy’ and ‘sell’ orders and execute trades. This is a tasking endeavor and requires one to keep checking price movements. 

Traders have to learn how to conduct TA (technical analysis) and examine the properties, or ‘fundamentals’, of the asset. You will need to consult charts, and keep up to date with the ongoings within the crypto market and watch out for signs that can influence prices. 

What is the benefit of using this strategy?

There are a few benefits of using this strategy to invest in XLM. You will not have to worry about holding the token and storing it in wallets to avoid losing the coins. Compared to ‘hodling’, you can generate profits much more quickly, and you can profit whether the price goes up or down. Some platforms will allow you to copy experts and implement their strategies in your XLM trading for great returns. 

3. Shorting

What is it?

If you think the price of XLM is going to drop, you can still make a profit by short-selling, which is sometimes called shorting. Brokers who support short-selling will lend you some tokens, say 100 XLM. You can sell these right away for their market value, $40 (at the time of writing). A week later, the price of Stellar has fallen, and you can re-purchase those 100 XLM using just $25 of the $40 you got from the initial sale. You give these 100 XLM back to the broker, meaning you owe them nothing now, and you get to keep the $15 left over as profit. 

Many brokers will allow you to use leverage to borrow large amounts of tokens, potentially maximising your profits. Be careful though: shorting is only profitable when the price of the coin comes down, so manage your risk accordingly to avoid losses if you predict the wrong move.

What is the benefit of using this strategy?

Short-selling using a broker means you don't have to deal with the actual asset and the complications involved. This is appealing for users who want to turn over a quick profit without using complicated security procedures. Shorting also allows XLM holders to make money even when the market for Stellar is not doing well, and as such is a great risk mitigation tool.

4. Using a Trading Bot for Trading

What is it?

Trading bots are computer programs that deploy sophisticated algorithms, artificial intelligence (AI), and machine learning (ML) to make trades automatically. AI helps the bots to make predictions, and ML allows the bot to learn from its mistakes and improve with time, making it more efficient. Thanks to complex algorithms, a crypto bot can collect heaps of market data and analyse it extraordinarily quickly, using these insights to make predictions and even place trades for the user. You just have to allow the bot to handle your trading.

Cryptocurrency trading robots make it easy for individuals with little knowledge of trading to enter the market and profit from the endeavor. All one needs is capital and a trading bot that allows them to trade XLM. Bots also ease the burden for the experienced trader who can delegate repetitive tasks to the robot. 

What is the benefit of using this strategy?

Bots can help you profit easily from trading XLM since they do the hard work for you. They will analyze the market and place trades automatically. The bot never sleeps, which makes this a great option for investors who want regular payouts but don’t have the time to trade. Additionally, you can profit more using a bot with a high success rate than you would as an inexperienced trader. 

5. Hedging Stellar Lumens

What is it?

Hedging can calm the nerves of cautious investors. This strategy involves taking new positions to cover potential losses from already open positions. This can be done by combining CFDS, shorting, and futures to hedge your XLM investment. Opening a new trade in the opposite direction to your initial investment may seem counterintuitive, but in reality it means that whatever movement the market makes, you are guaranteed to receive some profit.

If you want to guarantee a future profit, you can use a futures contract to agree on a profitable sale price ahead of time, or you can use short-selling to protect you from downside risk in the event of a price plunge.

What is the benefit of using this strategy?

There are several perks of using this strategy to invest in XLM. Namely, prudent investors can limit their exposure to risk, and be prepared for any market outcome. This allows you to maximize your profit potential while minimising your downside. By employing this strategy, you are also protected against XLM price volatility, which is a big turn-off for many novice investors.

Buy Stellar Lumens Today!

What to Consider Before Investing in Stellar Lumens

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

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. 

Risks

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.

Payment Methods

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.

Why Invest in Stellar Lumens?

2021 is turning out to be the year of cryptocurrencies. The market is now worth over $1 trillion for the first time, and it's on its way to 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.

Summary of Investing in Stellar Lumens

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. 

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