Filecoin or FIL is a cryptocurrency and digital payment system that has IPFS (InterPlanetary File System) as its base. FIL reached a valuation of $450B if fully diluted
Filecoin is the type of blockchain that allows renting unused space on hard drives to retrieve and store data. It has a similar model to Snowflake. Snowflake recently completed the largest software IPO in September.
Factors Behind The Surge Of Filecoin
Analysts have pointed out three possible factors behind the surge in Filecoin prices over the past few weeks. They are FIL’s uniqueness in comparison with Ethereum, rising demand in China, and technical momentum.
A China-based crypto-journalist, Wu Blockchain, says that there has been a gradual increase in demand in China for the cryptocurrency. FIL recorded a daily trade volume of $24.2B on Huobi. Huobi is the country’s biggest cryptocurrency exchange.
Fear of missing out or a FOMO trend may have influenced the Asian markets which is a plausible reason behind the reason. Along with the surge in demand, there was a rise in interest in the Chinese exchanges of futures trading which eventually had an effect on international platforms of futures trading.
With Filecoin prices increasing, the exchanges of major futures saw an increase in open interest as well. Bybt reported that FIL’s open interest had seen an increase of 46.37% in a span of 24 hours.
Waro, a trader that works with a pseudonym, gave the explanation as to how difficult it is to catch the top when such a strong uptrend occurs. Many traders try to forecast the top. This results in liquidations of short positions which further results in a temporary squeeze. In the end, this only fuels the rally.
Finally, the momentum of Ethereum could have acted as a catalyst for the surge. ETH analyst James Spediacci stated how Filecoin’s unique identity of being a layer one blockchain is absent from most other ETH rivals.