Filecoin (FIL) is one of the most prominent coins in the storage sector of cryptocurrencies. In the past month, the price and market capitalization of FIL has rocketed to new highs. On April 1, the coin reached $233.68 along with breaking into the top 10 cryptocurrencies by market capitalization.
Basically, Filecoin is a decentralized cloud-based data storage network that allows its users to gain rewards on selling their excess storage on an open-source platform. Filecoin is made by Protocol Labs.
Although FIL’s stint in the top 10 list was short-lived, it’s important to note that Filecoin’s fully diluted market capitalization hit a high of $450 billion. This is nearly half of the hallowed $1-trillion mark that Bitcoin recently held for 10 days in a row.
In the last 30 days, Filecoin has posted unprecedented gains of around 440% from trading around the $42 mark to trading in the $184 range. Even though the price has dropped around 20% from its all-time high on April 1, the fact that it has settled at three times the price before the surge is itself an incredible feat.
On March 17, the FIL token got another push from the market. The benchmark for institutional interest in cryptocurrencies, Grayscale Investments announced new funds that would invest in five cryptocurrencies. These tokens are Chainlink’s LINK, Filecoin, Livepeer (LPT), Basic Attention Token (BAT) and Decentraland (MANA). As a result of this announcement, FIL’s price rose 40% in 48 hours, indicating that the community and the market at large reacted positively to this development.
Speaking about the reasons why Filecoin is garnering institutional interest, Marie Tatibouet, chief marketing officer of Gate.io — a cryptocurrency exchange — said: “Data is the most valuable commodity today, and there is a race going on to figure out cheaper and more efficient methods of storing data.” Martin Gaspar, research analyst at CrossTower — a digital assets exchange — told Cointelegraph of how much of an impact this announcement really had on the markets:
“As of April 5, 2021, the Filecoin trust only had $8.1 million of assets, according to Grayscale. This is a very small amount relative to the recent $1+ billion of 24-hour trading volume CoinGecko shows, suggesting there are other key drivers behind the increase in price.”
Cameron Winklevoss, co-founder of the Gemini Exchange, pointed out that he wasn’t surprised that the token’s price was “rocketing.” He cited the core propositions that the Filecoin project brings like “the amount of network storage power” as the main drivers for the rise. Tatibouet further opined on this, saying: “Bitwise 10 Crypto Index Fund and Grayscale have both added FIL, while The9 Limited and New Universal have both made multi-million-dollar investments in Filecoin mining.”
However, there are many different factors at play here.
China’s market plays a deciding role for Filecoin
A crypto journalist from China, Wu Blockchain, noted on Twitter that on the day FIL reached its all-time high, it saw large volumes coming from China’s largest trading exchange, Huobi, with 24-hour trading volume reaching $24.2 billion. This volume was nearly three times that of Ether (ETH) and Bitcoin (BTC) for the same day. Gaspar further mentioned:
“Filecoin is popular in China and has strong interest from Chinese miners, who are required to pledge the FIL token as collateral, resulting in demand for the token. Moreover, with a shortage of BTC and ETH mining rigs, Filecoin mining seems to be an attractive alternative for these miners.”
According to CoinGecko’s data, as of April 9, Huobi accounted for nearly 40% of Filecoin’s 24-hour trading volume. This data supports the notion that the interest in Filecoin is mainly driven by retail investors and miners based in China. The hype around this token in China is such that there are allegedly even posters in the subway advertising Filecoin.
This is similar to the phenomenon of Bitcoin’s posters being put up in Soho, London, except with the difference that Filecoin’s are obviously an advertisement to push retail investors to buy the token.
Robbie Liu, market analyst at OKEx Insights — the research team at cryptocurrency exchange OKEx — told Cointelegraph: “Filecoin’s market development in China is very strong, and Chinese miners make up more than 95% of Filecoin’s nodes.” With China being the world’s cryptocurrency mining hub, it is only natural that the market will be highly sensitive to mining economics. Tatibouet further stated that the reason for the high demand is that FIL mining “is a lot more affordable than Bitcoin and Ethereum mining.”
In August 2020, the Chinese government announced its new internet infrastructure plan that will be focusing on expanding innovations in 5G, artificial intelligence and the Internet of Things. This plan could potentially have an impact on Filecoin’s ecosystem, as decentralized cloud storage fits into the agenda.
There are also unconfirmed reports that officials in the Chinese government are quasi-officially encouraging Filecoin mining as a decentralized cloud storage solution fits in perfectly with China’s vision for homegrown internet infrastructure.
The future of Filecoin
Another reason for the growing demand for Filecoin is the production cut scheduled on April 15. On the changing supply and demand economics of FIL, Liu stated: “The spike in FIL prices is mainly a result of speculation ahead of the April 15 production cut. The protocol currently releases 648,000 FIL per day, but after April 15, the production will decrease to 365,000 FIL per day.”
Thus, post the mid-year release of Simple Agreement for Future Tokens on April 15, the daily production of FIL will be reduced by 43.2%. At the time of writing, FIL has a circulating supply of 65.33 million tokens, with the maximum supply capped at 2 billion coins. Thus, such a drastic decrease in daily production could lead to a perception of scarcity for the token, in turn, causing retail investors and miners to buy more of the coin to weather the upcoming planned decrease in FIL’s daily influx.
Another interesting feature of FIL’s tokenomics is that it has a built-in mechanism, wherein miners must buy more FIL tokens in order to mine more of the cryptocurrency, which also acts as a utility and governance token for the Filecoin ecosystem. This mechanism prevents FIL from getting dumped in the open market by incentivizing the holders of the token by offering them more mining power.
The nature of Filecoin’s product offering puts it in direct competition with tech giants like Google, Amazon Web Services and Alibaba’s offerings. As Filecoin is a blockchain-based open network, the data store is non-tamperable, and the amount of storage it has access to is theoretically limitless.
Yet it is important to note that services from Amazon, Google and other tech giants are well-established and have been catering to retail and institutional needs since the beginning of cloud storage and computing being offered as a service. Liu believes that it is too early to say if Filecoin can compete with the giants, adding:
“While prospects remain positive, institutional-grade solutions rely on much more than just storage space. There is a need for operational management and tech support to fully host their services on cloud.”
Gaspar also explained the factors that Filecoin’s team would need to consider before really beginning to compete with the industry leaders in this space: “Filecoin will need to ensure its network remains online, files are securely stored and accessible and that the risks and costs of storing data on it are lower than that of a centralized storage solution.”
Although, how the FIL tokens demand sustains beyond the scheduled production cut remains to be seen, it is clear that due to Filecoin’s real-world use cases, the rise in price and market capitalization corresponds with a period of growth for the project and its offerings to compete in a market lead by companies with practically unlimited resources at their behest.
DOGE is Young People’s Middle Finger to the System, Says Mike Novogratz
Mike Novogratz, in a research report, stated that Dogecoin is “the most honest shitcoin”, calling it a “store of value” for young people wishing to express a “little bit of a middle finger to the system”.
Dogecoin’s Recent Price Action
DOGE has entered a steep and stunning climb during the past few months, going from mere pennies to over $0.65. Young people betting on the speculative and volatile crypto asset have made staggering amounts of money thanks to the recent insane rate of return.
Many theorize that this rise has been fueled by Tesla founder and business mogul Elon Musk, who often refers to Dogecoin on his infamous Twitter profile, tweeting in a (usually) positive manner. Oftentimes when an “Elon tweet” comes out regarding Dogecoin, it gives a nice little boost to the price.
Most recently, Elon Musk revealed that he would be hosting SNL, dropping a single hint: Dogefather. This enigmatic message has spurred thousands of young people worldwide to invest in DOGE, which, although extremely risky, has been facing undeniably bullish price action as of late. Will Elon Musk’s SNL special provide the fuel needed for DOGE to power through to over a dollar, or will it be a ‘sell the news’ event?
Novogratz Draws Parallels to GME
Novogratz, in his interview, urged people to “listen to what Dogecoin is saying”, as he sees it as very comparable to the GameStop fiasco (where a group of young retail traders pushed GME to new heights, partially in an attempt to liquidate hedge funds that were shorting the stock).
“There is nihilism and excitement to it,” Novogratz stated, adding, “there’s something really pure about it.”
Indeed, Dogecoin is not a successful ‘company’ in the traditional sense, and there is little to no innovative development work going on behind the scenes, but we’ve seen (in the stock market, for example) that the power of the masses if placed behind a single unifying idea, can work wonders.
It’s a massive game of tug of war — whether or not Dogecoin can sustain this dizzying momentum remains to be seen. One thing is for sure: millions of people will be tuning in to watch SNL this week.
Latin America’s Biggest Online Marketplace, MercadoLibre, Disclosed Bitcoin Holdings
On a financial results report dated May 5th, e-commerce giant MercadoLibre dropped the bomb. The company is the latest institution to add Bitcoin to its balance sheet. It follows MicroStrategy, Square, and Tesla’s highly covered buys. Bitcoin’s institutional adoption is in its infancy, but advancing non-stop.
In the financial highlights for 2021’s First Quarter, the company wrote a succinct:
As part of our treasury strategy this quarter we purchased $7.8 million in bitcoin, a digital asset that we are disclosing within our indefinite-lived intangible assets.
A modest allocation, considering MercadoLibre has almost $4B in assets, a cash reserve of $1.1B. It also has a market capitalization of approximately $76B. However, the move might be part of a bigger plan. The company recently opened a section on their website dedicated to real state commerce in Bitcoin and Bitcoin only. The pilot program includes 75 properties and 7 real state agencies willing to accept the cryptocurrency.
The Bitcoin-on-the-balance-sheet club
The investment puts MercadoLibre in a pretty exclusive club. The institutional adoption pioneer was MicroStrategy, a company that then issued bonds to buy even more Bitcoin. Twice. At the time, Bitcoinist reported:
Microstrategy announced today that it purchased $15 million worth of Bitcoin. The company’s CEO, Michael Saylor, tweeted this morning that his company had bought approximately 253 BTC, bringing its total holdings to about 91,579 BTC.
After that, Square announced a moderate buy of $50M worth of Bitcoin, and months later another one of $170M. It’s worth noting that the company buys and sells BTC through their flagship product CashApp. And that it keeps buying more. Six months ago, Bitcoinist reported:
Ikigai Asset Management’s Hans Hague recently noted that per his analysis, Square and Grayscale alone have accumulated $2.3 billion worth of Bitcoin in the past quarter.
The biggest player of all, of course, is Elon Musk’s Tesla. Reports that the company made more money from that investment than for selling cars are all over the Internet. In any case, Tesla made a big splash when it entered the space. Bitcoinist reported:
Traders flocked into the cryptocurrency market a day after American carmaker Tesla announced that it had purchased $1.5bn worth of Bitcoin as “alternative reserve assets” to their cash holdings.
In its filing with the Securities and Exchange Commission, Tesla said it plans to buy more Bitcoin in the future and—maybe—even enable its use as a medium of payment for its products and services.
MercadoLibre stock chart | Source: MELI on TradingView.com
More about MercadoLibre
It may not be a big name in the European and North American markets, but MercadoLibre is ubiquitous in Latin America. The company operates in:
- Costa Rica
- Dominican Republic
In the quoted financial results report, they describe themselves as:
Founded in 1999, MercadoLibre is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and as a provider of the necessary digital and technology-based tools that allow businesses and individuals to trade products and services in the region. The Company enables commerce through its marketplace platform which allows users to buy and sell in most of Latin America.
A question remains, will Bitcoin holdings make MercadoLibre’s stock rise?
Featured Image by Mark König on Unsplash - Charts: TradingView
Coinsmart. Beste Bitcoin-Börse in Europa
Novogratz’s Galaxy Digital set to acquire BitGo for $1.2B
Galaxy Digital is in the process of acquiring BitGo for $1.2 billion, which would be settled in stock and cash
Galaxy Digital, the firm owned by popular investor Mike Novogratz, is set to acquire BitGo, a leading independent digital assets infrastructure provider. The deal is worth roughly $1.2 billion and will be paid in both stock and cash.
In a press release yesterday Galaxy Digital said, “The acquisition will position Galaxy Digital as a leading global full-service platform for institutions seeking access to the crypto economy, offering an unparalleled breadth of industry-leading products and services at scale.”
Several reports surfaced last month, suggesting that the two companies are in advanced talks regarding an acquisition. Mike Novogratz, CEO and Founder of Galaxy Digital, said the acquisition of BitGo would turn his company into a one-stop-shop for institutions, boosting their efforts to institutionalise digital asset ecosystems and blockchain technology. Novogratz added, “The power of the technology, solutions, and people we will have as a result of this acquisition will unlock unique value for our clients and drive long-term growth for our combined business. We are excited to welcome Mike Belshe and the talented BitGo team to Galaxy Digital.”
Per the terms of the agreement, BitGo shareholders are set to receive 33.8 million newly issued shares of Galaxy Digital common stock. Furthermore, they will be paid $265 million in cash, which brings the total value of the deal to approximately $1.2 billion.
BitGo is one of the leading regulated custodians in the cryptocurrency sector. It currently provides services to over 150 exchanges and 400 institutional clients. BitGo controls over $40 billion in assets under management by supporting the custody of over 400 coins and tokens. BitGo CEO and Founder Mike Belshe said joining Galaxy Digital is an exciting new chapter for the company, allowing their clients to access a wide set of financial solutions.
Galaxy Digital planning to go public in the US
Galaxy Digital is a publicly-listed company in Canada. However, the firm is planning to officially list on a US stock exchange this year. In that regard, the company’s board of directors approved a proposed reorganisation and domestication designed to help the company achieve its goal of going public in the United States.
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