Stellar Lumens (XLM) Price Dived After Soroban Launch: Here’s Why

Stellar Lumens (XLM) price came under pressure in the overnight session even after a major development in the ecosystem. The token slipped to a low of $0.1150, a few points below this week’s high of $0.1211. It has lagged other cryptocurrencies now that it has risen by less than 10% from its lowest point this year. Most tokens have more than doubled in this period.

Stellar Network protocol 20 upgrade

Stellar Network, one of the oldest and most important players in the crypto industry, made an important milestone on Tuesday. After months of development, the developers made the protocol 20 upgrade possible.

This is a major development since the network now launched soroban smart contracts into the network. Soroban smart contracts make it possible for developers to build dApps in areas like Decentralized Finance (DeFi), Non-Fungible Tokens (NFT), metaverse, and games in the network.It is a major development since it was the biggest upgrade in Stellar’s network history on record.

Analysts believe that soroban smart contracts will help to boost Stellar’s ecosystem by marrying decentralized and centralized finance. For starters, Stellar network enables people to create representations of currency and handle transactions. Its most popular use case has been USD Coin (USDC), the second-biggest stablecoin in the world.

In this case, it is now possible for developers using Stellar’s stablecoins to incorporate it with their DeFi protocols. Further, if it is successful, the upgrade will help to create more utility for Stellar’s network.

Read more: How to buy Stellar.

Why XLM retreated after Soroban launch

There are three main reasons why the XLM token retreated after the developers launched soroban smart contracts. First, the retreat was in line with that of other cryptocurrencies. Bitcoin pulled back to $51,000 while Ethereum dropped after hitting the $3,000 mark.

Second, it retreated because of a situation known as buying the rumor and selling the news. This is a situation where traders buy an asset ahead of a major development or news and then sell it after it happens.

There are two recent examples of this. Ripple’s XRP price jumped sharply after the company won a lawsuit against the SEC and then pulled back when it happened. Similarly, Bitcoin price dropped sharply after the recent ETF approval.

In Stellar’s case, the token rose to $0.1211, its highest point since January 24th before the Soroban news. It then retreated when the news happened.

Finally, there are concerns about whether Soroban will be successful because of how competitive the smart contract industry is. It will now compete with the likes of Solana, Ethereum, Avalanche, and Sui. Succeeding in the industry is quite difficult even for established and well-known brands like IOTA, which has struggled to gain traction with its Shimmer network.

Stellar Lumens price forecast

The 4H chart shows that the XLM token price pulled back after reaching a monthly high of $0.1211. As it dropped, it retested the important support at $0.1168, its highest swing on January 27th. Despite the pull back, the token remains above the 50-period moving average while the Relative Strength Index (RSI) and the Stochastic Oscillator have all pointed downwards.

Stellar has also moved between the 23.6% and 38.2% Fibonacci Retracement levels. Therefore, the outlook for XLM price is moderately bullish, with the initial level to watch being at $0.1211. A break above that level will see it retest the 50% retracement point at $0.1230.

Is it safe to buy XLM?

Stellar has always been a great network in the blockchain industry. However, it is often seen as a boring platform because it rarely makes headlines. The key catalyst to watch next will be inflows into its ecosystem after the launch of Soroban contracts. As such, in the near term, the token will likely rebound but it will underperform other cryptocurrencies like AVAX and SOL,