15:16 20 December 2022
The price of Filecoin has fallen in the past few days as investors questioned the cryptocurrency’s utility and risky assets came under pressure from hawkish central banks. The price has already fallen more than 98% from its historic highs. Filecoin has historically gained ground thanks to a growing belief that blockchain technology will change the way data is stored:
Filecoin is a large blockchain platform that aims to compete with the cloud market of the dominant platforms Amazon, Microsoft and Google by enabling decentralized data storage. Instead of relying on huge, centralized storage servers around the world, Filecoin allows anyone with free storage space to sell their free bandwidth. Anyone with a smartphone, laptop or home data server can allocate storage space to the network and receive FIL cryptos in return. Other projects that aim to revolutionize the cloud industry are Storj, Arweave and Siacoin. They have all seen a dynamic decline recently:
Nearly $5.7 million of FIL’s long positions were liquidated on December 16. Source: Coinglass
On the demand side, there are concerns about whether people and businesses still need a new decentralized storage platform, as Amazon, Microsoft and Google’s cloud businesses are doing very well. Traders may question the usefulness of decentralized data storage protocols with huge and growing capacity because there is not yet enough demand to make optimal use of them.
According to Filecoin, the storage platform has a capacity of 17.6 million terabytes. It is unclear how much of this data is used by customers. One company using the Filecoin cryptocurrency is OpenSea, an NFT giant built on the Ethereum blockchain. It would likely require a large increase in demand for NFT tokens to renew the utility of the network. At OpenSea, monthly trading volume has fallen to $159 million from around $4.8 billion at the start of the year. That’s a drop of around 97% and almost perfectly mirrors the size of Filecoin’s drop from $236 to just $3 today.
Filecoin on the M15 chart. Source: xStation5 by XTB
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