The Stellar price has tumbled as the sell-off in the cryptocurrency industry gains steam. The XLM price has tumbled by more than 13% in the past 24 hours, bringing its total market cap to more than $13 billion. Its ranking in cryptocurrencies has dropped to 17 and is sandwiched between Polygon and VeChain.
Why Lumens dropped
There is no specific reason why the Stellar price tumbled today. Instead, it is mostly because of the overall correlation that exists between Bitcoin and altcoins.
There are three main reasons why these currencies are tumbling. First, in a statement earlier today, China said that it would extend its limit on digital currencies citing their volatility and the need to protect investors. The regulators said:
“Prices of cryptocurrency have skyrocketed and plummeted recently, and speculative trading has bounced back. This seriously harms the safety of people’s property and disturbs normal economic and financial orders.”
This is a notable statement considering that China is a leading player in the crypto industry. Indeed, the recent rally in altcoins like Shiba Inu and VeChain has been credited to activities in online chat platforms like Weibo and WeChat.
Second, Stellar price has dropped because of the overall sell-off in global assets. In the United States, the Nasdaq 100 index has dropped by more than 1% while the Dow Jones and S&P 500 have all fallen by more than 0.30% in the futures market. The same price action happened in Europe where the DAX, CAC, and FTSE 100 dropped.
The biggest concern is that investors are increasingly worried about inflation. Earlier today, data by the Office of National Statistics (ONS) showed that consumer inflation more than doubled in April. The same trend happened in the United States where inflation rose by 4.2%. Therefore, investors are generally worried about interest rate hikes in major countries.
Stellar price prediction
The daily chart shows that the XLM price declined sharply today. In fact, it is currently 35% below its year-to-date high. Notably, the coin is approaching the lower line of the ascending wedge that is shown in black. Further, it has moved below the 25-day and 50-day exponential moving averages.
Therefore, at this stage, it is to early to tell whether the Stellar price will keep dropping. That price action will be confirmed if it manages to move below the lower line of the channel. If it happens, the next key support level to watch will be $0.3893, which is 23% below the current level. However, if bulls return, the coin could retest the upper side of the channel.