Titan Crypto: Spotlights
In the world of crypto, it's valuable to understand what you own and why you own it. That's why we're sharing our theses on each coin in Titan Crypto.
Today, we're taking a look at Stellar (XLM), the premier payment network for global institutions, enterprises, and retail.
Stellar has benefitted from the positive tailwinds across the crypto landscape since we launched, but we see a long runway ahead with our long-term price target of $1.50 (upside potential of ~330%).
Let's dive in.
Stellar (XLM): Integrating with global financial institutions to solve cross border payments
Thesis: Stellar will serve as a major solution to the remittances and cross-border payments space, offering near-instant, low-cost transactions between any pair of currencies and tokenized real assets. Stellar carries a 5.5% weighting in our portfolio.
Stellar has solidified its position within the blockchain payments space, differentiating itself from other blockchains with its unique, payments-focused value propositions
The platform allows users to issue new assets such as stocks, currencies, and cryptoassets, and exchange them for other assets via built-in asset exchange features. Stellar’s native token, XLM, serves as the “bridge” currency between other assets to facilitate and create liquidity.
Fast and efficient transactions: (<5 sec finality) and fees of (0.000002 USD per tx)
Asset issuance: Anyone can tokenize assets and transfer or trade them over the Stellar network quickly and cheaply. The creator can apply rules or restrictions to fit their requirements such as setting monetary policy, controlling who can hold the token (through KYCs), clawing back assets from other accounts or lost keys. These features are critical to allow regulated assets to be issued on the Stellar network, such as central bank digital currencies (CBDCs) and digital debt securities
Anchors fiat on/off ramp: “Anchors” are trusted institutions around the world that provide easy on/off ramps for users. They accept deposits of fiat currencies such as USD, CNY, EUR via existing rails, and send a user the equivalent digital tokens to be used in the network. Users can exchange USD -> EUR, for example, and redeem those tokens for the real-world assets they represent at destination
Cross-asset payments: Identify and automatically convert currencies along the most optimal conversion paths to execute the best exchange rates for users
Protocol-native decentralized exchange (DEX): Users can buy, sell or trade their assets directly from their wallets
Safety over liveness: Unlike most public blockchains that prioritize liveness (system is never halted; disagreement on consensus leads to multiple fork versions instead), Stellar prioritizes safety (system rather halt than fork; confirmed transactions cannot be later rolled back). This payment-focused design choice means that Stellar can guarantee its users the security and near-instant finality of their transactions, unlike other blockchains such as Bitcoin which typically requires 5+ blocks (30 mins +) before transactions can be deemed finalized
Turing-complete smart contracts (in development): This will allow Stellar to support wide-ranging use cases such as DeFi
We're seeing growing network activity and adoption
Unlike other crypto projects, Stellar is trying to integrate with, rather than replace, the existing global financial systems
Based on our research, Stellar has been one of the best and most active crypto projects when it comes to partnerships and building out their global reach:
Ukraine’s government: Chosen to be the platform for the country’s central bank digital currency (CBDC) earlier this year
IBM: Global partnership to implement blockchain banking via its IBM World Wire project
Circle: Became the third official chain for USDC, the world’s leading digital dollar stablecoin
Deloitte: Infrastructure provider for Deloitte Digital Bank
Stripe: Sole early investor in Stellar
Franklin Templeton: Plans to tokenize a new fund on Stellar
Coinbase: Users can earn 4% cashback in XLM on its credit card
Vonovia (largest German real estate group): Issued $24M digital bond
Various regulators: World Economic Forum, IMF, OCC, and more
In summary, we believe Stellar is a solid long-term bet that warrants an allocation. Stellar has strong fundamentals and wide user adoption, and is relatively undervalued in our eyes. While its tokenomics still need time to improve, we're bullish that Stellar will continue to gain mainstream adoption as the go-to payments and regulated asset creation platform.
For the rest of our memo on XLM and more, see our launch materials.
Why invest in crypto now?
We believe the next big tech paradigm shift will be driven by crypto and blockchain technologies. The crypto space is experiencing an extraordinary level of software development and innovation, and has immense growth potential over the coming decade.
It's Still Early
There are many signs suggesting that those who invest in crypto today are still “getting in” near the beginning. There is still a great deal of skepticism and disillusionment from the public at large: typical of any technology that is very early in its life cycle. Existing infrastructure is still too complicated and confusing for mainstream adoption. Even regulators are still debating on how to regulate the space.
Crypto is generally uncorrelated to the behavior of other asset classes, and could serve as a strategic allocation in portfolios. Extensive research has shown that a small allocation of cryptos would have consistently and significantly increased both the cumulative and risk-adjusted returns of a portfolio.
As always, let us know if you have any questions.
The Titan Investment Team