Stellar (XLM) Price Catalysts: How Sustained Open Interest and Derivative Activity Could Drive XLM to $0.5

The Stellar (XLM) network's recent Protocol 23 upgrade, activated on September 5, 2025, has positioned the asset at a critical inflection point. While direct derivative market data like open interest and funding rates remain elusive, the upgrade's technical advancements—parallel smart contract execution, 5,000 TPS throughput, and 40% lower Soroban fees—have created a fertile ground for renewed speculative interest. This analysis explores how on-chain metrics and speculative dynamics could catalyze XLM's ascent to $0.5, despite recent headwinds.

On-Chain Catalysts: Protocol 23's Scalability Surge

Protocol 23, dubbed “Whisk,” introduces foundational improvements to Stellar's infrastructure. By enabling parallel transaction processing and in-memory Soroban state execution, the upgrade slashes latency and reduces fees, making the network more attractive for institutional-grade DeFi and tokenized asset applications. A 37% spike in GitHub commits post-upgrade further signals developer enthusiasmAnnouncing Protocol 23^[3], suggesting a potential surge in dApp deployments and user activity.

While transaction volume and wallet activity data post-September 2025 are not explicitly detailed, the technical upgrades imply a latent capacity for growth. For instance, lower fees could incentivize microtransactions and cross-border payments—Stellar's core use cases—driving on-chain volume organically. If adoption accelerates, this could indirectly boost derivative market participation as traders bet on increased utility.

Speculative Dynamics: Profit-Taking, Delistings, and XRP Correlation

XLM's price trajectory has been shaped by speculative forces. A 32.5% rally over 90 days triggered profit-taking, reducing short-term volume and creating volatilityStellar (XLM) Price Prediction For 2025 & Beyond^[2]. Compounding this, the delisting of XLM futures on MEXC—a major derivatives exchange—eroded liquidity, exacerbating downward pressureStellar (XLM) Price Prediction For 2025 & Beyond^[2]. However, the asset's 0.95 correlation with XRPStellar (XLM) Price Prediction For 2025 & Beyond^[2] suggests that XLM could benefit from XRP's momentum if broader market sentiment improves.

The failed breakout above $0.42 resistance in late 2025 highlights structural challenges. Yet, Protocol 23's launch coincided with renewed institutional curiosity. If XLM's improved scalability attracts new projects (e.g., tokenized real-world assets), derivative traders may re-enter the market, increasing open interest as they hedge or speculate on potential use-case-driven demand.

Derivative Market Implications: A Path to $0.5?

While open interest and funding rate data for XLM remain sparse, the upgrade's technical merits could attract derivative market activity. For example:
1. Liquidity Rebalancing: If MEXC's delisting is offset by new derivatives listings on platforms like Binance or Kraken, open interest could rebound.
2. Funding Rate Arbitrage: Lower fees on Stellar's network might incentivize traders to exploit funding rate discrepancies between spot and derivative markets.
3. XRP Spillover: A bullish XRP cycle could drive XLM's price higher via correlation, with derivative traders leveraging leverage to amplify gains.

To reach $0.5, XLM must overcome psychological resistance and rebuild speculative conviction. Protocol 23's 5,000 TPS throughput and reduced fees provide a narrative for long-term value, but near-term success hinges on derivative market participation. If open interest stabilizes and funding rates normalize, the asset could test $0.42 again, with a potential breakout to $0.5 if institutional adoption accelerates.

Conclusion: A Calculated Bet on Utility and Speculation

Stellar's Protocol 23 upgrade has laid the groundwork for a renaissance in on-chain activity, but price realization depends on speculative dynamics. While current derivative data is limited, the technical upgrades and XRP correlation suggest a plausible path to $0.5—if liquidity providers and traders realign with the asset's fundamentals. For investors, the key is to monitor post-upgrade wallet growth and derivative market listings, which could signal a shift in sentiment.