Robinhood Markets (HOOD -0.58%) just announced that it would add Stellar (XLM -1.93%) to its menu of crypto assets within its popular trading app. This unexpected news comes at a time when the price of Stellar has been in a free fall for much of 2022. Is now finally the time for Stellar, which trades at about $0.12, to make a run at the $1 mark?
Even with the good news from Robinhood, a lot has to go right for Stellar to reach $1. In its entire history (which extends back to 2014), its all-time high was just $0.94. That's right: Even during the frothiest crypto markets of the past few years, Stellar never broke the psychologically important $1 barrier. So let's look at some of the factors that could help propel Stellar to the $1 mark.
The Robinhood seal of approval
Stellar is a top 30 cryptocurrency by market capitalization, and is widely available for trading on the top cryptocurrency exchanges. But getting listed on Robinhood could be a great way to get in front of even more investors, especially millennial and Gen Z crypto enthusiasts who dream about super-cheap cryptos that rocket to the moon.
Right now, there are less than 20 cryptos listed on Robinhood for trading, so Stellar is getting an implicit but very important seal of approval. At the very least, people who have forgotten all about Stellar will now get a subtle reminder every time that they log in to buy or sell popular cryptos on Robinhood.
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The Stellar payment network
The real value of Stellar is in its payment processing network. Using the token, you can send money around the world nearly instantly and for almost no cost. In one hypothetical example, a bank in Japan could send money to a bank in Mexico for no cost, almost instantaneously.
That's actually a huge deal, because if you didn't use Stellar, you would have to convert yen into pesos and also use an international payment network to send the money from Japan to Mexico. Ordinarily, that type of transaction would really rack up the fees and foreign currency conversion costs.
So it makes sense that Stellar has lined up a lot of big payment partners around the world, including IBM and MoneyGram International, to make sending money cheaper and easier. IBM, for example, used Stellar to set up a proprietary global payment network, and MoneyGram has used Stellar to reduce the cost of sending remittances around the globe. The aim of Stellar is to connect the world's financial system, not to replace the world's financial system. So you can see why many people have been bullish about the prospects of Stellar in the past.
New innovations in the pipeline
At the beginning of 2022, Stellar unveiled a road map for the future that involved a number of interesting elements. One of these is smart contracts. You can think about smart contracts as "programmable money," and this could be very big for the future of Stellar, adding even more value to the payment network.
And Stellar emphasized the need for more diversity and innovation in how and where its services are provided. It noted that markets such as Mexico, Brazil, and Kenya could become central to its future as a market innovator in developing nations, as part of its mission to serve the world's unbanked.
So why hasn't the price of Stellar gone interstellar?
Given all of the new buzz surrounding Stellar, why is it still trading for mere pennies? One answer could be that it has significantly more rivals than it did back in 2014. Up-and-coming blockchains that have recently launched tout their lightning-fast transaction-processing speeds. And don't forget, Stellar has long had a direct rival in XRP (XRP -1.41%), which has a payment-processing network often compared to Stellar's.
For the moment, it looks like the most optimistic scenario for Stellar is for it to reclaim its late 2021 highs sometime over the next 24 months. That would require a tripling in value. From there, Stellar would have to roll out a large number of partnerships with financial-services companies and expand globally to triple once again and have a shot at the magical $1 mark. But if Stellar manages to pull off this feat, it could turn out to be one of the greatest 10-bagger crypto investments ever.
