The likelihood of Stellar[XLM] extending its uptrend will be determined by…

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This week has been quite eventful for the entire cryptocurrency market. Bitcoin’s price fell below $30k before recovering, and most altcoins experienced a similar drop. While recoveries have been fairly significant across the board recently, it is worth noting that none of these alternatives appeared to be able to match Stellar’s pace.

In fact, Stellar’s price has been skyrocketing for the majority of this week. Furthermore, at the time of writing, XLM had the highest daily gains (15.27 percent) among the top 20 cryptos. All of the other alts in the aforementioned list, on the other hand, struggled to generate returns greater than 6%.

 

A host of factors, in conjunction, has led to XLM’s price rally. For starters, talks of Stellar taking over MoneyGram, one of the largest money transfer services in the U.S, have been gaining steam over the last couple of days. Now, even though the acquisition has not yet been confirmed, the crypto-community seems to be excited.

Additionally, other protocols have been experimenting with Stellar. For instance, Script3’s Project Venus is currently exploring short-term forward contract capabilities on the Stellar network. What’s more, Stellar recently launched an improved version of its open-source mock wallet application. This ‘demo wallet’ replicates the experience of creating/importing a Stellar account, adding assets, and performing transactions with those assets.

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The aforementioned events, to a certain extent, have impacted XLM’s on-chain metrics. Let’s see how.

1. Development activity

This metric has been picking up steam over the last week, as evidenced by the attached chart. Even though the network’s development activity dropped precipitously in the first few days of the month, it appeared to be resuming at the time of writing.

Source: Santiment

Furthermore, when compared to the start of the year, the press time level (22.10) appeared to be quite impressive. If the network’s development activity continues in this direction, Stellar’s long-term prospects will be quite enticing.

2. Adjusted NVT

XLM’s adjusted NVT ratio seemed to be following the broader uptrend narrative. The same was underlined by Messari’s chart too. In fact, a high ratio indicates that the network value is gradually becoming overpriced in comparison to transactional volumes. Notably, the alt’s current trading volume ($700 million) is nowhere near its May highs ($3 billion). To balance things out, the same would have to go up.

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However, a high ratio favours network adoption and utility, so Stellar has little to worry about aside from trading volume.

3. Sharpe Ratio

At the time of writing, the alt’s Sharpe ratio was well above zero – 1.08, to be exact. This metric specifically outlines an asset’s potential risk-adjusted returns. A Sharpe ratio greater than 0.5, as a rule of thumb, indicates ‘market-beating performance.’ To be more specific, XLM holders are currently being compensated more than usual for the risk they are taking.

Source: Messari

Well, looking at the way things have panned out so far, the odds of this alt extending its uptrend seem to be more likely than not.

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