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How To Invest in Stellar Lumens - Step-by-Step Guide

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Author: Eleonora Di Felice Updated: 27 January, 2022

Stellar Lumens (XLM) is the cryptocurrency used by Stellar, a platform based on blockchain which has been created from a Ripple hard-fork. Stellar is an open-source protocol that allows transferring money in a decentralized manner. Its network and cryptocurrency are entirely independent of one another. Stellar can support any type of transaction with both other cryptocurrencies and fiat currencies. 

Its technology is based on the Stellar Consensus Protocol, which allows its users to participate in the validation of the system of transactions in the Stellar Lumens network through the formation of trusted groups.

Invest in Stellar Lumens in 3 Steps


Get a Stellar Lumens wallet

To begin exchanging Stellar Lumens, you must first have access to some kind of XLM wallet. You can either download a wallet app, enter a wallet portal, or purchase a Stellar Lumens-compatible hardware wallet. There are many options you can consider: both a software and a hardware wallet can be suitable. 

Wallet apps offered by trading and exchange platforms have undeniably been the most convenient place to store cryptocurrencies like Stellar Lumens throughout recent years. By uploading Stellar Lumens compatible wallet apps to your mobile, you can quickly check your funds at the click of a button.


Join a Stellar Lumens exchange

Signing up for a cryptocurrency platform that allows you to exchange Stellar Lumens for fiat currency is the first and most critical move. Many applications and websites provide both trading and wallet services. You will need to register and verify your identity on an appropriate platform before you can purchase Stellar Lumens.


Invest in Stellar Lumens

You can start investing in Stellar Lumens at this stage. In most cases, you will be required to check your identification and enter your payment method. Depending on the platform you are using, this could take more than a day. You will be eligible to make your first payment after your bank account or credit card has been checked.

Investing in Stellar Lumens Explained

To better improve your performances while investing in Stellar Lumens, you can familiarise yourself with the different financial instruments and methods you will be using during your investment journey.

A cryptocurrency wallet is one of the most valuable tools because it helps you store and secure your assets. Wallets come in a variety of styles, but they mostly fall into two groups. These are either connected to the internet or not.

What exactly does this imply? Cold wallets get their name from the fact that they “refrigerate” your investment, keeping it away from the internet. This feature could be critical for some people, as it is not recommended to keep the funds open to possible hacking if you plan a long-term strategy. This is particularly true when it comes to significant investments. They are basically hardware wallets that are not connected to your device. 

As you can imagine, hot wallets are instead storage for your cryptocurrency where you can easily access it all the time. Hot wallets are a good option for frequent traders who need easy and quick access to their tokens. 

Smartphone applications are, without a doubt, the most popular way to store cryptocurrency funds these days. This could be the right option for you if you do not want to make long-term investments. This type of software is particularly useful for storing and trading since it represents a centralized structure through which the customer can conveniently manage their investment.

While we are fully conscious of how competitive this business may be and how rapidly we can need to sell and purchase cryptocurrencies, being able to navigate these markets from the palm of your hand can be especially useful.

Various protocols are in force on platforms that exchange cryptocurrencies to ensure security.

To start, we have multi-factor authentication, which is the most commonly used encryption technique by major financial institutions around the world. The user is expected to share multiple contact channels during the registration process. This is because the software will ask you for your chosen password first, and then give you a message, an email, or a phone call to confirm that you are the person attempting to enter the account.

Know Your Customer (KYC) regulation is another kind of security measure. This type of monitoring is used to deter criminal organisations or entities from gaining undue access to financial services. A platform usually demands some form of identity verification through the use of documents to establish the identity of the user. 

This form of authentication is also required by anti-money laundering (AML) rules, which apply to both banks and other financial service providers.

Strong KYC and AML procedures are usually put in place by reputed platforms and help in customer identification procedures, monitoring of transactions and risk management.

When it comes to investment strategy, you must consider whether you want to take a high-risk stance on the exchange and sell in response to small market trends, or whether you want a long-term strategy that does not require spending a lot of time on these platforms.

Payment Methods

You will be able to invest in Stellar Lumens using a variety of methods. The majority of the sites where you can invest in this cryptocurrency accept payments from your bank account as well as your credit/debit card.

The default payment must be checked before it can be used, and this is why, during the registration process, you will usually be asked to enter your chosen payment methods. 

Typically, the machine would remind you to upload a small sum to your account or will charge the same small amount to your credit card or bank account. Verification can take several days, particularly if you use a bank account as your payment form.

You will be able to make your first deposit after you have checked your payment methods. 

Stellar Lumens Investment Strategies

We will now list some of the most well-known trading techniques for Stellar Lumens. These strategies will show you how to begin investing, how to get the most out of your money, and how to benefit from it.

Buy and ‘Hodl’ 

What is it? 

The name of this technique comes from a common joke in the cryptocurrency community. When the Chinese economy had a down in 2013 there was a significant drop in Bitcoin valuation, which mobilised the whole economy. Cryptocurrency's value was plummeting. In that tragic situation GameKyuubi, a drunk guy, posted "I AM HODLING".

The meaning behind his message was that you do not attempt to deceive the market if you are not a great trader. If you hold still, there will be new ups and your position will come back to become valuable just as it was before.

Investors who use the Hodl strategy ignore short term price fluctuations and look for long term price appreciation. 

How to use this strategy

The “buy and hodl” technique is straightforward to execute. You can just put the capital into Stellar Lumens and then stay calm. This is the only way to escape the worst enemies of a trader, FOMO (fear of missing out) or FUD (fear, uncertainty and doubt).

When to use this strategy

This technique can ideally be used when the price of Stellar Lumens has reached a low point on the charts. Since its release, XLM has moved between the price of a few cents up to $0.80. 

It should also be noted that cryptocurrencies are somewhat unpredictable, with new markets often outperforming older versions. Hodling strategy requires a lot of patience on the part of the investor as cryptocurrencies are volatile and tend to rise and fall rapidly within a short period. 

Buy Fractional Stellar Lumens

What is it? 

When we speak about fractional, we refer to an investment strategy under which the aim is to purchase only a fraction of cryptocurrency rather than a large amount. This technique is most often used for cryptocurrencies that have hit a high valuation and are out of reach of retail investors.

How to use this strategy

In the long term, this approach is beneficial and realistic because it integrates into the market also those investors that cannot afford to invest incredible sums. A trader can accumulate a significant investment by putting aside a small sum per month. Furthermore, the investment will likely appreciate in value over time.

When to use this strategy

A fractional strategy works best in the long term. It involves purchasing small amounts and gradually increasing your earnings over time. 

Long Position on Stellar Lumens

What is it? 

The most popular strategy used in cryptocurrency trading, and the opposite of the short position, is to take a long position. This strategy entails buying a financial product, like a Stellar Lumens investment, with the intent of watching its value rise in the future.

Marginal trading, a method that entails trading with borrowed money, makes extensive use of these techniques. Of course, you should keep in mind that trading without necessarily controlling the funds necessitates a certain level of expertise. After a bad decision, you might lose a lot of money, so you should be able to afford some kind of accident before you start selling. a long position can be initiated using a financial instrument known as Contracts for Differences (CFDs). CFDs allow a user to bet on the future price of an asset without actually owning the asset. 

How to use this strategy

This approach entails betting in a bull market and can be quickly implemented on any trading site or smartphone app used for trading. The term "bull market" refers to a market that is increasing in valuation and in which you can invest in your cryptocurrency in the hope that its value can continue to rise with this trend. This strategy requires monitoring the market trends carefully and should be used after a user has gained enough experience.

When to use this strategy

This strategy will pay off during a bullish trend. The increase may be attributed to different factors, such as political news or merely a pattern spread by more influential traders. It is a smart idea to stay up to date with what is going in the world and in the cryptocurrency environment because these factors can influence the market's whole trend.

Buy Stellar Lumens Today!

Benefits of Investing in Stellar Lumens

  • Peer-to-peer- This technology allows the system to work in a decentralised way, still ensuring the maximum degree of safety.
  • Reduced costs- Stellar aims to interconnect financial institutions to reduce costs deriving from money transfer, especially international ones.
  • Stellar Consensus Protocol- This system is based on the validation of transactions from specific groups of the network (FBA, Federated Byzantine Agreement). This system creates a series of groups that build trust within themselves. A transaction is considered valid when verified by one of these groups. This protocol is one of Stellar’s strengths, it allows it to process up to 1000 tps.
  • Rapidness- The shared ledger gets updated every 2-5 seconds.

Disadvantages of Investing in Stellar Lumens

  • Relatively famous- Compared to other cryptocurrencies known worldwide, Stellar Lumens is not very popular as some other cryptocurrencies that get traded for thousands of dollars.
  • Debate with Ripple- Considering Stellar Lumens was born from a hard-fork of Ripple, there is some uncertainty as to which of the two should be considered the original and legitimate one.
  • Decentralisation- Compared to Ripple who uses a centralised system, its decentralised method may be considered less stable by some investors.

Other Ways of Investing in Stellar Lumens

We looked at various ways to exchange Stellar Lumens in the parts above. Still, there are other ways to buy/sell this cryptocurrency.

If you're thinking of meeting with an anonymous vendor, make sure you meet in a secure location and have some background details about them first. Peer-to-peer exchanges are a good option since they provide escrow services and are more secure than in-person transactions. 

Other options for trading Stellar Lumens include leveraged trading and ETFs. Let us take a closer look at these two choices.

Trade Stellar Lumens on Leverage

Leverage is a strong option when trading in cryptocurrency. This is why it is not always allowed and verifications are needed before you are given the chance to use it.  Trading with leverage means receiving borrowed funds from your provider, with which you will trade as if they were yours. This method works very well when traders are trying to make moves in the short term.

Leverage is possible on systems such as eToro, Skilling, and Plus500, but it is not an option offered to every member. This is because this style of trade will result in significant losses if not played carefully.

Invest in a Stellar Lumens ETF

Exchange Traded Funds (ETF) are another choice for investing in Stellar Lumens. If you are not confident you can keep up with the price tracking, or check your assets daily, this approach may be the right one for you.

This investing style is indeed simpler for beginners because it allows them to perform some actions on the market without actually being involved. If you want to invest in Stellar Lumens but do not feel confident enough to enter this environment by yourself, this approach might be your choice.

Thanks to this method it is possible to invest in Stellar Lumens singularly or in assembled funds that include more than one cryptocurrency.

Stake Stellar Lumens to Get Passive Income

Stellar Lumens are a stackable cryptocurrency. The technological elements of the process may not be the easiest for every user. This form of action can be delegated since a token owner can ask someone else to stake their funds.

It is, though, much simpler when it comes to staking on an app. Many platforms allow users to stake Stellar Lumens. To start this process, users must own at least 10 XLMs to receive staking rewards. The reward in XLM is calculated every day and distributed every month. Distribution is completed on the 20th of every month.

Alternative Cryptocurrencies

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Frequently Asked Questions

  1. Yes. Most platforms list Stellar but check with your local exchange.
  2. KYC and AML procedures help to establish a safe and secure environment on the platform. Most reputed platforms insist on such norms to reduce the risk of fraud.
  3. Jed McCaleb is the founder of this cryptocurrency.
  4. Yes, but leaving assets on an exchange is not a good idea. A user should consider using a cold wallet or purchase a hardware wallet for storing assets safely.
  5. Use a reputed and regulated platform. A user can also secure his/her account by using additional security features such as 2FA.
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