Stellar (XLM) catching up to XRP price gains.

Stellar (XLM) catching up to XRP price gains.

Blockchain Industry: Exploring the Ripple Effect on Stellar (XLM) Price Rally

The blockchain industry has been abuzz with the recent court ruling on Ripple (XRP) by the U.S. Securities and Exchange Commission (SEC). This ruling has not only impacted Ripple but has also had a ripple effect on other related tokens, such as Stellar (XLM). Stellar’s price has surged by around 60% since the court ruling on July 13, showcasing its positive correlation with XRP. However, it is important to understand the context and potential risks associated with this price rally.

Ripple’s Impact on XLM Price Rally

Stellar’s recent price surge can be attributed to the positive correlation it shares with XRP. Both Stellar and XRP were founded by Ripple’s co-founder, Jed McCaleb, and the price trends of these tokens typically mirror each other. This relationship has been particularly apparent on the daily timeframe, with a correlation coefficient of 0.95 as of July 23. This near-perfect tandem indicates that the movements of XRP and XLM are closely aligned.

However, it is essential to remain cautious, as XRP price risks a potential 40% decline by September. If this prediction holds true, it is likely that XLM will also face similar bearish pressure. Investors and traders should keep a close eye on these developments and carefully evaluate the risks associated with the ongoing rally.

Technical Analysis of XLM Price Rally

From a technical perspective, the recent price rally in XLM has pushed its weekly relative strength index (RSI) to its most overbought levels since April 2021. As of July 23, XLM’s weekly RSI was around 72.5, suggesting a potentially overextended market.

Additionally, XLM currently trades near a strong resistance confluence, which includes its 200-week exponential moving average (EMA) and a horizontal line near $0.164. These resistance levels pose a challenge for further upward movement, potentially leading to a price correction in the coming weeks.

In a bearish scenario, XLM’s price could decline towards its 50-week EMA, located near $0.111, by September. This represents a potential 30% decrease from current levels. It is worth noting that this support level aligns with XLM’s previous price action during the May-November 2022 session, adding further significance to its importance.

On the other hand, if XLM manages to decisively break above the resistance confluence, it could rally towards $0.22 by September, marking a substantial 45% increase from its current price levels. This price level has previously acted as both support and resistance in the period from June 2021 to April 2022.

Conclusion

Stellar’s price rally in the aftermath of the Ripple court ruling is a testament to the intricate dynamics within the blockchain industry. The positive correlation between XLM and XRP exemplifies the interconnectivity of blockchain projects and their influence on each other’s performance.

However, it is crucial for investors and traders to exercise caution and carefully analyze the technical indicators and potential risks associated with this rally. The overbought levels of XLM’s weekly RSI and the strong resistance confluence present challenges for sustained upward movement. Moreover, the forecasted decline in XRP price adds further uncertainty to the future direction of XLM.

As the blockchain industry continues to evolve, it is essential to understand the intricacies of various tokens and their interdependencies. Keeping a close watch on market trends, technical analysis, and regulatory developments will enable investors to make informed decisions in this dynamic and ever-changing landscape.

XLM/USD daily price chart. Source: TradingView
XRP/USD and XLM/USD daily correlation coefficient. Source: TradingView
XLM/USD weekly price chart. Source: TradingView
XLM/USD weekly price chart. Source: TradingView