Stellar (XLM) has recently experienced a significant surge in price, rising by approximately 60% following Ripple’s legal victory over the U.S. Securities and Exchange Commission (SEC). While this growth is notable, XLM’s value still remains around 20% lower than its previous peak. Additionally, the strong correlation between XLM and Ripple’s XRP has fueled both excitement and apprehension among investors.
The Correlation Between XLM and XRP
There is a close correlation between the price movements of Stellar’s XLM and Ripple’s XRP. Currently, the correlation coefficient between the two tokens stands at an impressive 0.95, signifying almost perfect synchronization. It is not surprising considering Stellar was initiated by Jed McCaleb, one of Ripple’s co-founders. As a result, investors often observe similar trends in both the XLM and XRP markets.
Potential Risks for XLM
Despite the recent price increase, XLM faces potential risks, primarily due to the potential decline in XRP’s value. Analysts predict that XRP’s price may drop by approximately 40% by September, which could exert bearish pressure on XLM. As a result, investors should tread with caution and assess the overall market dynamics before making any significant investment decisions.
Technical Indicators Point to a Correction
From a technical standpoint, the recent rally in XLM’s price has led to the weekly relative strength index (RSI) reaching its most overbought levels since April 2021. The current weekly RSI stands at approximately 72.5 as of July 23. Furthermore, XLM encounters a formidable resistance confluence represented by its 200-week exponential moving average (200-week EMA) and a horizontal line near the $0.164 mark. These technical indicators suggest that XLM is likely to experience a significant price correction in the near future.
In the event of a bearish scenario, where XLM undergoes a price correction, it could potentially decrease towards its 50-week EMA, situated around $0.111. Such a decline would equate to approximately a 30% decrease from its current value. Interestingly, this support level aligns with XLM’s historical price movement between May and November 2022, providing some insight into potential future trends.
On the other hand, if XLM manages to overcome the resistance confluence and achieves a decisive close above it, the token may experience a rally towards the $0.22 mark by September. This upward movement would result in a significant increase of approximately 45% from its current price levels. It is worth noting that this particular level has previously acted as both support and resistance during the period between June 2021 and April 2022.
The recent developments in the XLM market have left investors and analysts pondering its future trajectory. While the token has experienced a notable price increase, it remains vulnerable to potential market fluctuations, particularly in correlation to XRP. With upcoming months, market conditions are likely to offer more clarity concerning the price direction and overall performance of XLM.
The XLM market exhibits burstiness, characterized by sudden and significant price movements. The recent surge in XLM’s price following Ripple’s legal victory serves as a prime example of this burstiness. In light of this dynamic and rapidly changing environment, investors and traders must remain vigilant and closely monitor market developments to capitalize on potential opportunities or mitigate risks effectively.
Stellar (XLM) has seen a substantial increase in price after Ripple’s legal victory but remains below its previous peak. The strong correlation between XLM and XRP adds another layer of complexity to the token’s future trajectory. Technical indicators point to a possible price correction, but there is also a chance of a rally if certain resistance levels are surpassed. However, market uncertainties and potential risks associated with XRP’s performance indicate the need for caution. Vigilance and careful monitoring of the XLM market will be essential for investors and traders in this dynamic and ever-changing landscape.
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