- Stellar Development Foundation burns 50 percent of XLM supply
- XLM price only surges by 20 percent after burn
- Here’s why the price of XLM did not surge by 100 percent after 50% token burn
Stellar Lumens News Today – The Stellar Development Foundation (SDF) recently announced a token burn of over 50 percent. The firm burnt more than 50 percent of the total supply of XLM tokens. The Foundation made the decision to enhance the efficiency of the development of the digital currency. The announcement had a bullish effect on the price of Stellar Lumens (XLM). XLM to USD price surged by more than 20 percent after the announcement. Reducing the total supply of the digital currency had a positive impact on the coin. However, the effect is not up to expectations.
Stellar Lumens (XLM) Price Fails to Doubles after 50 Percent Token Burn
Normally, to maintain the market cap, the price of the digital currency should have doubled. It should have surged by 100 percent since the total supply was cut down by more than 50 percent. The founder of Adamant Capital and Coinmetrics – Nic Carter – said:
“I will be the one to point out that the fact that XLM is only up by 20 percent on the news (instead of 100 percent) that 50 percent of the supply is being burned in solid evidence against the “burn and deflationary” thesis.”
This is the second change announced on the supply metrics of Stellar Lumens. Recently, the Stellar Development Foundation decided to burn the coin fees in the future, removing the one percent annual inflation completely.
Stellar (XLM) Price Today – XLM / USD
Why Did XLM Price React Poorly?
There seem to be a lot factors involved. The circulating supply of the digital currency is currently not affected by the coin burn. As a result, the actual holdings of investors remains the same at the moment. The quantity of XLM tokens that were burnt was with the Foundation. While the exact amount plunged from 105 billion to 55 billion, the amount of XLM tokens in circulation remains 20 billion.
In addition, reducing the total supply would not result in a 50 percent decrease in the market cap. For the 20 percent increase, the market cap still stands to lose about 40 percent from its total book value. At the moment, the total supply with the SDF is about 30 billion, which is still 50 percent more than the total supply. In a blog post, the Stellar Development Foundation said:
“We view these as ‘Stellar’s lumens’, not so much owned by the Foundation as held by us temporarily to use for initiatives that support Stellar and the ecosystem.”