Stellar — the open-source cryptocurrency payments network — is now ranked as the second most valuable cryptocurrency (behind Bitcoin) according to OnChainFX’s implied market cap.
The Stellar Network has seen some recent positive news including the official debut of IBM’s Stellar-powered ‘Blockchain World Wire’ payments system and the acquisition of Chain by Lightyear, a Stellar-focused company backed by The Stellar Development Foundation. The new company is called Interstellar.
OnChainFx and Implied Market Cap
OnChainFx offers some excellent metrics for analyzing market trends and on-chain data for cryptocurrencies. Stellar’s rank at second in implied market cap (IMC) is notable for several reasons and needs to be distinguished from market cap ratings on sites like CoinMarketCap.
The IMC on OnChainFx specifically refers to the year 2050 IMC, meaning it represents the implied value of the expected supply of the token in the year 2050. In effect, it accounts for the emission schedules of tokens rather than comparing market caps of tokens where some have only released a fraction of their supply while others have reached their total supply already. This allows for normalizing the expected supply compared to the value, giving a more accurate metric for the relative value of the token.
The IMC for Stellar is noteworthy because its emission rate is annualized at 1 percent inflation yet it has only issued 13.7 percent of its supply. This indicates a stable long-term value for the XLM token because it has the lowest percentage of supply issued (by a substantial margin) out of the top 13 tokens ranked by IMC.
However, XLM has a strong price dilution risk. A useful metric that takes into account Stellar’s enormous supply over the long-term is Implied Risk to the Current Price, which measures the total supply risk if the current market cap was diluted by the long-term supply. In the case of Stellar, this would imply a risk of -87 percent versus Bitcoin’s -13 percent. Similar risks are prevalent among cryptocurrencies with a low supply issuance compared to others with higher supply issuances.
Overall, XLM represents a strongly valued cryptocurrency as it has ascended to the top of altcoins in IMC. However, it carries with it some substantial price dilution risk that needs to be taken into account over the long-term.