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Filecoin hit a completely diluted market cap of $450 billion when three main factors catalysed a quick technological rally.
Filecoin (FIL), a digital payment and cryptocurrency infrastructure developed on top of the InterPlanetary File System (IPFS), has a completely diluted value of $450 billion.
Filecoin is a blockchain that enables users to rent unused hard drive space to store and retrieve data. Its model is similar to Snowflake, which completed the biggest software IPO in history in September 2020.
If you’re excited about Snowflake, just wait until you learn about Filecoin
— Barry Silbert (@BarrySilbert) September 16, 2020
A combination of three factors likely led the price of FIL to surge in recent weeks: technical momentum, rising demand from China, and its uniqueness compared to Ethereum.
Analysts say big demand is coming from China
According to Wu Blockchain, a crypto-journalist based in China, the demand for FIL has been heating up in China.
The daily volume of FIL on Huobi, which ranks as China’s largest cryptocurrency exchange, reached $24.2 billion. The journalist said:
“China is crazy for Filecoin, with a 24h increase of more than 30%, reaching a maximum of $236. The 24h trading volume of FIL in Huobi, China’s largest exchange, reached $24.2b, nearly three times the volume of the second ETH $8.8b, Bitcoin was $7.8b. FILDOWN, a short-selling leveraged token in Binance FIL, plummeted by 53%, with a turnover of US$3.4 billion, indicating a large number of short FIL liquidation in Binance.”
A possible possibility would be that a FOMO-like movement across Asian markets, including China, caused a powerful uptrend driven by the derivatives industry.
As demand in China increased, open interest on Chinese futures markets increased, gradually flooding into global futures trading platforms.
Technical momentum is strengthening
When the price of FIL began to increase, the open interest across major futures exchanges began to increase rapidly.
According to the data from Bybt, within 24 hours, the open interest of Filecoin increased by 46.37%.
— Bybt (@bybt_com) April 1, 2021
When a cryptocurrency sees a clear uptrend like this, it is challenging to capture a peak, according to Waro, a pseudonymous investor.
Often traders want to guess the peak, which leads to short position liquidations, which induces a short squeeze, which fuels the rally.
“I may not understand why $FIL keeps pumping but what I do know is trying to catch a top is suicide more often than not. For those that don’t understand that tweet: The likelihood of you getting murdered trying to catch a top short is higher than you shorting the top.”
FIL eventually saw an abrupt short-term top, falling 23% within merely 45 minutes across major exchanges.
Ethereum’s momentum could be a catalyst
An Ethereum analyst, James Spediacci, said that he has consistently stressed over the last four years that Filecoin offers distinction as a layer one blockchain that some fail to do as a rival of Ethereum.
According to Spediacci, decentralising cloud storage with IPFS is a revolutionary technology that adds value to the blockchain room. He stated:
“I’ve been saying this since 2017: ‘Filecoin is the only other blockchain besides Ethereum that actually adds value to the world by decentralizing cloud storage with IPFS and it is complimentary to Ethereum.’ If you dumped your $FIL at $20, you’re not going to make it.”