Tradecipher is a crypto investment app that combines an intuitive trading platform with useable, relevant research available for users in 100 countries. Every weekday (M-F), we publish a weekly report covering XLM, EOS, Industry, BTC, and ETH (in that order).
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In this issue: View the PDF here
- Price Reports: Stellar is down 16.3% over the last 7 days - it has underperformed against major competitor Ripple (-15.7%) and Bitcoin (-6.8%)
- Tradecipher Take (TT) #1: Libra may corner the retail peer to peer market - but they are leaving behind big institutions. Will it be Ripple or Stellar who picks them up?
- Tradecipher Take #2: Interstellar's "Slingshot" brings anonymity and speed to interbank settlements.
- Tradecipher Take #3: Technical Analysis: Stellar to continues its decline sub $0.10.
- Tradecipher Take #4: Sentiment Analysis: More bad news ahead?
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TT #1: How Stellar can Survive Libra
TL;DR: Libra is going to dominate the retail space for peer to peer transactions - but Stellar and Ripple may have a chance to convince institutions to use their platform.
As finance has become more global, banking settlement has become an increasingly thorny problem, since money needs to cross national borders with greater frequency. This has led to an increase in blockchain-based settlement solutions.
Stellar, Ripple, and Libra are all key competitors in the space - understanding XLM’s future prospects requires an understanding of its competition.
Libra provides fiat backed low cost peer to peer payments on a centralized network. Stellar is a decentralized not-for-profit that provides high throughput and low fee instant settlement for any asset pegged to XLM. Ripple provides both private and public low cost transfers using a interbank database.
Stellar: Private high speed and low fee interbank settlement using virtually any transferable asset
- Transactions can be done externally to increase scalability
- Blockchain based - ledger cannot be rewritten
- 2.5x the transactions per second of Ripple and 4x that of Libra
- Key developments are implemented by a non-profit foundation
Ripple: A glorified database to transfer funds from one bank to another
- Very low transaction fees
- Existing network of institutional payment-providers like banks and money services businesses
- Interbank transactions can be kept private using xRapid technology
Libra: Peer to peer payments on a centralized network using a stablecoin backed by a set of traditional currencies
- Potential 2.6B user base
- Facebook brand name recognition + social media sign in
- Partnership with large scale payment networks such as Mastercard and Paypal
Tradecipher Take: Libra has every advantage when it comes to peer-to-peer payment, and retail customers. Facebook has massive network effects that it can use to get billions of users to use Libra to send money.
However, institutional customers - especially those in Asia - may want to stay away from a platform that clearly represents American interest, and has a board that clearly exists to benefit specific corporations.
Libra requires users to opt in to the Facebook network and voluntarily give up their transaction data and privacy. While most of us have already done that by creating Facebook accounts - institutions are unlikely to give up the same data to a potential set of competitors.
Stellar, and Ripple, offer private transaction methods specifically built for global institutions - with little upfront costs. Stellar is even a non-profit so they are not acting in corporate interest but only for the advancement of their protocol. The new Slingshot protocol - discussed on the next page - might buy Stellar time to partner with institutions beyond IBM and the 6 global banks already in their pipeline. WireX recently announced 26 different fiat backed stablecoins on the Stellar protocol which will give banks the ability to transmit funds across a global variety of financial institutions. Ripple has similar partnerships that may provide it with the ability to secure institutional customers
Furthermore, Libra is based on Facebook - which is banned in China, meaning Libra may never get access to the world’s most important market.
Libra is definitely bad news for every token used in financial settlement - but it isn’t going to automatically win.
TT #2: Stellar Builds an Institutionally Focused Protocol
TL;DR: Stellar is about to provide Institutions with instant settlement on a private and fast blockchain. This will help it compete with Libra for institutional customers.
Interstellar - the institutional arm of Stellar - is working on a new bank to bank payment channel called Slingshot. It’s a blockchain based payment channel focused on privacy and scalability. It’s key features are:
- Privacy - allows smart contracts with cloaked assets
- Easy Integration - provides API platform compatible with many systems.
- Versatility - supports non-blockchain transactions
Tradecipher Take: The implementation of Slingshot protocol will lead to increased demand for XLM on the open market - driving price higher - as banks need to peg their assets to XLM for the Slingshot payment channels to operate.
In last week’s XLM report we highlighted Stellars Protocol 11 update which helps retail clients transact faster and easier - now XLM offers solutions to institutions via the new Slingshot protocol which will come with an easy to integrate API. Stellar has very high throughput, reliability and transaction speed - far surpassing other blockchains, and new competitor Libra.
Slingshot makes Stellar even more appealing to financial institutions, since its payment channels are private and anonymous. In order to survive and compete with Libra, Stellar needs to make itself as appealing as possible to institutional customers.
Expect Stellar to use Slingshot with the banks that it’s working with through partnership with IBM blockchain.
Sentiment: Stellar Continues Its Decline
The internet has been relatively quiet about Stellar since its recent price decline started. We’re near relative lows in both price and sentiment right now (2)
In last weeks XLM report we identified the main negative sentiment and price driver. Jesse Lund, head of IBM Blockchain partnerships, and the architect of XLM’s partnership with IBM departed somewhat mysteriously. This led to a spike in discussions and an anticipated decrease in price(1).
However, The lack of recent discussion around Stellar (2) indicates that the market may have moved on from this news. Until there is significant positive or negative news around XLM, Sentiment analysis remains inconclusive and does not affect our SELL rating.
That’s it for the XLM weekly report from June 24 - July 1, 2019. Make sure to subscribe to get tomorrow’s EOS report. Full reports are free until July 9, 2019, at which they will only be available for Tradecipher Members.
Additional Readings And Sources
TT#1: How Stellar can Survive Libra
TT#2: Stellar Builds an Institutionally Focused Protocol