Is Stellar (XLM) Poised for a 34% Rebound as Technical and On-Chain Indicators Suggest a Bottoming Process?

Stellar (XLM) has long been a polarizing asset in the cryptocurrency market, oscillating between undervaluation and speculative hype. As of December 2025, the token is trading near its 52-week low of $0.22, with mixed signals emerging from technical indicators, on-chain metrics, and market sentiment. However, a closer examination of these factors reveals a compelling case for a potential 34% rebound to $0.28–$0.31, driven by a confluence of technical accumulation, growing on-chain utility, and cautious optimism about long-term fundamentals.

Technical Indicators: A Bearish Trend with Accumulation Signs

XLM's price action in December 2025 has been characterized by bearish momentum, with the RSI nearing oversold territory and the MACD histogram confirming downward pressure. Yet, critical support levels at $0.21–$0.24 have held firm, acting as a magnet for accumulation. Analysts note that the Supertrend indicator and a positive shift in the Awesome Oscillator suggest buyers are stepping in to defend this zone. A sustained recovery above $0.27 is seen as a pivotal catalyst for bullish momentum, as it would invalidate the current descending channel and open the door to a retest of $0.28–$0.33.

The MACD's weakening bearish divergence is particularly noteworthy. While the indicator remains negative, its flattening slope indicates that downward momentum is losing steam-a classic precursor to a reversal in technical analysis. This aligns with the broader narrative of a "bottoming process," where price consolidates in a key support zone before resuming an upward trajectory.

On-Chain Metrics: Quiet Strength Amid Price Stagnation

Despite XLM's muted price performance, on-chain activity tells a different story. Stellar's network operations hit an all-time high in December 2025, driven by surges in Payment and Path Payment transactions. This surge in liquidity and real-world usage-particularly in cross-border payments-suggests growing adoption, even as the token price remains range-bound.

Total Value Locked (TVL) on the Stellar network also reached a record $179.18 million in December 2025, signaling institutional confidence in the platform. This divergence between price and on-chain fundamentals is a common feature of accumulation phases, where long-term holders and institutional participants build positions ahead of a potential breakout.

The X-Ray upgrade (Protocol 25), which introduced zero-knowledge proofs and configurable privacy, further underscores Stellar's technological maturation. While the upgrade failed to trigger an immediate price surge, it laid the groundwork for enhanced utility in privacy-sensitive applications-a factor that could drive demand in 2026.

Market Sentiment: Fear Dominates, but Catalysts Loom

Market sentiment for XLM in December 2025 is predominantly bearish, with the Fear & Greed Index at 27 (Fear) and derivatives data showing rising short positions. However, this fear could be a double-edged sword. In crypto markets, extreme fear often precedes capitulation, after which buyers step in to capitalize on discounted assets.

Social media sentiment on Reddit and Twitter reflects this duality. While the Fear & Greed Index highlights widespread pessimism, discussions in the Stellar community focus on upcoming upgrades like Protocol 23 and the v25 privacy protocol vote in January 2026. These developments, if executed successfully, could reignite retail and institutional interest.

Derivatives data also provides a cautionary signal. Open interest in XLM futures has dropped from $600 million to $144.63 million, indicating reduced speculative activity. This decline could either signal a lack of conviction in the asset or a quiet accumulation phase by long-term holders. Given Stellar's history of under-the-radar growth, the latter interpretation appears more plausible.

The Case for a 34% Rebound

Combining these factors, a 34% rebound to $0.28–$0.31 is not just plausible-it is increasingly probable. The key catalysts include:
1. Support Holding: A sustained close above $0.21 would validate the accumulation zone and trigger a retest of $0.28–$0.31.
2. On-Chain Momentum: Rising TVL and transaction volume indicate growing utility, which could attract new capital in early 2026.
3. Protocol Upgrades: The X-Ray and v25 upgrades position Stellar to compete in privacy-focused use cases, potentially attracting institutional adoption.
4. Market Sentiment Shifts: Extreme fear metrics often precede capitulation, after which buyers step in to capitalize on discounted assets.

Risks and Counterarguments

Critics argue that XLM's bearish momentum could persist if key support levels fail. A breakdown below $0.21 would likely expose further downside to $0.20, with a bearish scenario projecting a drop to $0.20. Additionally, macroeconomic headwinds-such as a broader crypto market correction-could delay or negate the rebound.

However, the confluence of technical, on-chain, and fundamental factors suggests that the risks are being priced in. Stellar's growing utility in cross-border payments and institutional partnerships (e.g., Wirex and U.S. Bank integrations) provides a long-term floor for the asset.

Conclusion

Stellar (XLM) is at a critical inflection point in December 2025. While the immediate outlook remains bearish, the technical and on-chain indicators point to a bottoming process. A 34% rebound to $0.28–$0.31 is contingent on holding key support levels and executing upcoming protocol upgrades. For investors with a medium-term horizon, XLM's undervaluation and growing utility make it a compelling case study in accumulation and potential breakout.