Stellar (XLM) Burns Half of Supply to Support Coin
The XLM asset rallied immediately after a token burn event and a shift to lower inflation in new coin generation.
Stellar (XLM) now operates with half its usual supply, after the Stellar Development Foundation decided to burn 55 billion coins. The decision arrived after it became clear the XLM lying on the sidelines were not necessary for the market, or for adoption.
XLM, which is the open-source offshoot of the Ripple platform, also saw the price of its chief asset slide and stagnate. Right after the token burn decision, XLM shot up by more than 17% to $0.08. The burn, however, did not bring XLM closer to older peak values, and it is yet to be seen if the recovery will last.
With the token burn, XLM avoids the fate of Ripple’s XRP, where skepticism is fueled by the large-scale escrow of Ripple. Every month, a billion new XRP have the chance of being sold, thus increasing the supply. Last month, Ripple apparently distributed 600 million XRP.
The Stellar foundation now has about 30 billion XLM left for various purposes. Before the burn, XLM had a supply above 105 billion, of which only 20 billion were in circulation.
Skeptics viewed the decision as “desperate”, as the project has faced headwinds after the 2018 bear market. The usage of the Stellar network, much like Ripple’s protocol, failed to go beyond limited use and testing. The Stellar DEX also slowed down its activity significantly.
Then, the question was put up if other projects with a large supply would end up burning some of the coins:
The new abridged supply will also mean XLM will be out of the top10 of coins, and no longer in the list of coins with more than $1 billion in market capitalization.
The burn will also not affect the supply that is currently in circulation, which is still enough to depress the price. XLM also sees trading of just around $600 million’s equivalent in 24 hours, and receives limited inflows from Tether (USDT).