[If XLM reaches its all-time high market cap, Stellar will trade at this price]
Cryptocurrency supply inflation has a significant impact on investment, and a deep understanding of the impact of token economics on cryptocurrencies is critical for investors.
Take Stellar Lumens (XLM), for example, which has the highest inflation rate among cryptocurrencies. Finbold offers a unique perspective on this phenomenon, calculating the price at which XLM could potentially trade if it reaches Stellar’s all-time high market cap. This is achieved through analysis of major indices and demand benchmarks.
It’s worth noting that any inflationary asset requires more demand to maintain its value. Both the supply and demand sides have an impact on the rise and fall of cryptocurrency prices.
Specifically, XLM reached an all-time high price of $0.9381 on January 4, 2018, when Stellar Lumens had a market capitalization of $1.7554 billion and an estimated circulating supply of 1.8712 billion XLM.
However, Stellar has surpassed this market capitalization twice since then, but at a lower price. On June 16, 2020, its market capitalization reached an all-time high of $1.8385 billion. By May 2021, XLM had a market capitalization of $1.8366 billion, but the price was only $0.6661 per token.
As of now, Stellar’s circulating supply is 50.001 billion XLM, which means an inflation of 3.1289 billion XLM (167%) in six years, with an average annual inflation rate of about 27%, exceeding Solana and XRP.
This inflation portends that XLM will trade significantly below its all-time high when it reaches past speculative demand.
Assuming circulation on December 5, 2023, Stellar was valued at $0.3677 per token at its peak market cap, down $0.5704 (60.8%) from its 2018 peak.
Still, this implies a potential upside of 205% from the current price of $0.1202.
This forecast assumes Stellar demand remains unchanged in 2018, 2020 and 2021. However, there is no guarantee that such demand will reoccur. On the other hand, greater demand may emerge in the coming years, but continued supply inflation will limit this growth.
