Stellar, the payment-focused blockchain company, is facing several ecosystem challenges that have affected its token’s performance.

Stellar’s Performance and Market Position

The Stellar token has dropped by over 44% from its highest point this year, underperforming compared to other popular cryptocurrencies like Bitcoin and Ethereum.

Ecosystem Challenges

Established a decade ago, Stellar has struggled to gain substantial market share in the payments industry. Data indicates that the volume of stablecoins, mostly USD Coin, on its blockchain has grown from $6.95 million in December last year to over $210 million today. While this growth is notable, it still lags behind blockchains like Tron and Ethereum, which have over $56 billion and $75 billion in stablecoin assets, respectively.

Further data reveals that Stellar’s newly launched blockchain, Soroban, has struggled to attract developers. According to DeFi Llama, it only has four DeFi dApps: LumenSwap, Blend, VNX, and SoroSwap. LumenSwap holds over $8.46 million in assets, while Blend has $1.03 million.

Soroban’s main challenge is the highly saturated blockchain industry, with competitors like Base, Arbitrum, and Blast vying for market share. For instance, Blast, launched recently, has attracted $1.25 billion in assets, while Base has over $1.4 billion.

Technical Analysis of Stellar’s Price

Despite these challenges, Stellar’s price has formed several bullish patterns that could push it higher in the near term.

On the daily chart, the XLM token has formed a falling wedge pattern, a popular reversal sign. It has now rallied above the upper side of this pattern.

Additionally, the Moving Average Divergence Convergence (MACD) indicator has formed a bullish divergence pattern. The Relative Strength Index (RSI) has also broken out above the upper side of the triangle pattern. These are signs that Stellar Lumens could soon break out.

However, there are risks to this bullish thesis. The biggest risk is that Bitcoin has formed a double-top chart pattern and a small rising wedge, indicating a potential bearish breakout. Bitcoin’s failure to climb above the key resistance level at $60,000 after the recent US inflation data release suggests it could drop below $50,000, a move that would push altcoins like Stellar downwards.

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