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

The Stellar (XLM) has dropped by over 44% from its highest point this year, underperforming 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 shows that the volume of stablecoins, mostly USD Coin, in its blockchain has risen from $6.95 million in December last year to over $210 million today. While this growth is impressive, it trails behind other blockchains like Tron and Ethereum that have over $56 billion and $75 billion in stablecoin assets. 

Further data reveals that Stellar’s recently launched blockchain, Soroban, has struggled to attract developers. According to DeFi Llama, it only has four DeFi dApps like LumenSwap, Blend, VNX, and SoroSwap. LumenSwap has 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 seeking to gain market share. Blast, which was launched recently, has attracted $1.25 billion in assets, while Base has over $1.4 billion.

Stellar price has formed a bullish divergence

Stellar Lumens price chart

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 to a bearish breakout. Bitcoin also failed to climb above the key resistance level at $60,000 after the US inflation data release on Thursday.

That implies that Bitcoin could drop below $50,000, a move that would push altcoins like Stellar downwards.