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Supply inflation can have a massive impact on cryptocurrency investments. Being able to understand tokenomics’ effects on cryptocurrencies offers a valuable edge for investors.
Stellar Lumens (XLM) has one of the highest cryptocurrency inflations, and Finbold looked into it from a different perspective. Interestingly, we calculated the price XLM would trade at if it ever hits Stellar’s all-time high market cap. This was possible by looking at leading indexes and using demand as the benchmark.
Notably, any inflationary asset needs proportionally more demand to keep its same value. Both supply and demand can influence whether a cryptocurrency’s price will go up or down.
In particular, XLM had an all-time high price of $0.9381 per token on January 4, 2018. At that time, Stellar Lumens reached a capitalization of $17.554 billion, with an estimated 18.712 XLM circulating supply.
However, Stellar has already surpassed this market cap twice, with lower prices. The all-time high market cap happened on June 16, 2020, on a highly volatile day at $18.385 billion. In May 2021, XLM was capitalized at $18.366 billion with even lower prices, at no more than $0.6661 per token.
Stellar Lumens supply inflation and its economic effects
Let’s explore Lumen’s supply inflation and its economic implications. As of this writing, Stellar has a circulating supply of 50.001 billion XLM. This results in a supply inflation of 31.289 billion XLM (167%) in six years, or around 27% a year. Higher than both Solana’s and XRP’s yearly inflation.
Essentially, the price projection also shows the massive economic effects of this inflation. In case this payment network reaches its previous speculative demands, XLM would trade at a proportionally lower price than the corresponding all-time high.
Considering the circulating supply on December 5, Stellar would be priced at $0.3677 per token at its highest capitalization. Interestingly, a loss of $0.5704 (60.8%) from its highest price in 2018, with an even lower market cap.
However, this still indicates a potential 205% increase from the current price of $0.1202.
It is important to understand that the forecast requires the same demand for Stellar as in 2018, 2020, and 2021. In this context, there are no guarantees that this demand will ever be seen again. On the other hand, it is also possible that a higher demand surges in the following years, which its continuous supply inflation will suppress.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.