- Stellar (XLM) explodes amid news that the company burned more than half of its coins in circulation.
- Tuesday’s gains were quickly wiped out as the smart money took the chance to dump their positions.
- Nevertheless, the cryptocurrency looks attractive in the long-term time frame.
In technical analysis, there’s an adage that goes, “buy the rumor; sell the news.” We’re seeing this nugget of wisdom in play out in Stellar (XLM).
On Monday, the Stellar Development Foundation announced that it burned more than half of the Lumens in circulation. Supply went from around 105 billion to 50 billion. From a basic supply and demand standpoint, the reduction of coins in circulation should be extremely bullish for the cryptocurrency.
Nick Hellman sounds excited about the prospects of Stellar burning 55 billion Lumens. | Source: Twitter
However, the crypto token is not reacting as expected. While Stellar posted gains of 10% Tuesday, it eventually succumbed to profit-taking. Those who bought the rally are very likely sitting on significant losses.
Volatility Whiplashes Those Who FOMO’d
A closer look at Stellar’s chart reveals that most of the traders who bought Tuesday were whipsawed. The fear of missing out (FOMO) likely drove them to smash the buy button as they expected the cryptocurrency to sharply rise due to the supply halving of the supply. However, the rally quickly faded as interest in the cryptocurrency dropped.
The anatomy of a quick pump and dump. | Source: TradingView
A look at the hourly chart shows that most of the gains were made immediately after the announcement of the coin burn. In two hours, Stellar Lumens was up by over 25% as the coin went from $0.07023800 to $0.08795500.