Is It Worth Investing In Filecoin?
Although Filecoin is yet to be one year old in the cryptocurrency market, it stirring debates among investors and enthusiasts. The coin had its beginnings in 2014, but it started trading actively in October 2020. It recently surged in popularity and joined the ranks of the top 30 most valuable cryptocurrencies in the world.
While Filecoin’s valuation has dropped for the past few months, it's now the 26th biggest cryptocurrency by market cap.
In April, Filecoin grew parabolically to hit its current all-time high price of $237.24, according to data from CoinDesk. This represented a 926% increase from the start of January where FIL was trading at around $23.
Bitcoin’s crash affected most of the other cryptocurrencies, and Filecoin was not spared. It started dropping around mid-April and it rose again in September only to trade again at around $65 at the moment.
So, is Filecoin still worth investing in? Will the price rise again?
Read on to find out.
- What is Filecoin (FIL)?
- How Does Filecoin (FIL) Work?
- Filecoin Price History
- Filecoin Price Prediction for 2021
- Different Ways to Invest in Filecoin
- Is Filecoin a Good Investment?
- Will Filecoin Rise Again?
- Conclusion: So, Should I Buy Filecoin?
What is Filecoin (FIL)?
Filecoin is a peer-to-peer decentralized storage network that allows its users to either rent out storage space in their computers or buy space to store their files. People who provide storage services are incentivized with FIL tokens by those who need space. These are the same as Bitcoin miners who are rewarded with BTC coins every time they verify a transaction and add it to the blockchain.
Like Bitcoin, Filecoin also uses blockchain technology to decentralize cloud data storage. This way, users won’t have to trust a single entity to store their information. Instead of storing the files in a central server, Filecoin splits and stores in on different computers around the world.
People who provide storage services quote their own fees based on the quality of their service, and those who need their data stored have to pay a fee.
This is the same case with cloud-based storage services like Dropbox. The difference is that with Filecoin, you don’t have to stick with a single monopoly. Instead, you can shop around and pick the best deal from the network of ‘storage miners’.
Anyone with a good computer and some extra storage space can sign up to be a storage miner and earn some incentives when people ‘rent out’ this space. According to the Fielcoin network, you will need a computer with powerful hardware to qualify as a storage miner.
The idea of Filecoin was introduced by Juan Benet in his whitepaper: Filecoin: A Cryptocurrency Operated File Storage Network. The network is now developed by Protocol Labs and is being built on an earlier version of the protocol known as the Interplanetary File System (IPFS).
In 2017, Filecoin had an ICO where it raised more than $250 million, making it the biggest ICO at that time. Later in 2020, the FIL token was launched and started trading in various exchanges.
How Does Filecoin (FIL) Work?
To understand how Filecoin works, let’s first look at how centralized mainstream storage services like Dropbox work. When you sign up for Dropbox, they allow you to store up to 2GB worth of data with its basic package. This could be images, documents, and so on.
Dropbox then sends this data to their central storage centres in the U.S. If you need to retrieve your files, later on, you can simply re-download them. While Dropbox is efficient as it is, storing data in this way is risky. In case of a hack, millions of users will lose their data.
Filecoin phases out this problem by using a decentralized storage system where data is stored in various computers around the world instead of a single central storage point.
Also, with Filecoin, you can’t simply re-download your files when you need them. Instead, you pay a small fee to a retrieval miner who will get them for you.
In this regard, there are three parties that generally make up the Filecoin network. These are:
- Clients: These are the people who need storage services. As a client, you can choose who you want to store your data with based on such factors as speed and pricing. You will need to pay a small fee using FIL tokens for your files to be stored or retrieved.
- Storage miners: These are people who have free storage spaces, and their task is to store data in the Filecoin network. In return, they are paid with FIL tokens which they can then sell for fiat currencies or store in their wallets. Storage miners provide several storage options and quote their own prices based on how fast their services are. The miner also has to provide proof that they can efficiently store data, and the proof is verified on the network with incorrect data being rejected.
- Retrieval miners: These are the people who are paid to facilitate data retrieval from the storage miners for clients. Retrieval miners are important because once data is stored, it is encrypted, and the storage provider does not have the decryption keys. It is the work of a retrieval miner to access these keys and find the needed files from the network of computers around the world.
Read Also: Could Filecoin Be A Millionaire-Maker Coin?
Filecoin Price History
Filecoin is among the youngest cryptocurrencies in the market today. Although its whitepaper was first published in 2014, the FIL token was not introduced to the market until October 2020. That means that FIL has been on the market for less than a year.
For this reason, there is not much price history to analyze. So, we will only be looking at about 8 months of price data.
Filecoin, like most new cryptocurrencies, had a slow start in 2020. For instance, it traded between $20 and $30 from October 2020 until February 2021 where it started growing.
This was due to the market-wide bull run that saw most cryptocurrencies record historic growths. Around 9th February 2021, Filecoin surged from $24.86 to $42.90. This got many new investors excited, and soon the coin’s trading volumes went up.
As a result, the price continued on a bull run that saw it hit the $100 mark by the end of March 2021. At this point, most expected that there would be a correction but the cryptocurrency market, in general, seemed fertile for all digital assets.
Filecooin went ahead to achieve its current ATH of $237.24 at the start of April 2021. From there, investors started selling, and the price went downhill. By April 9th, the price had dropped to around $154. In mid-April, it went back to $180 then dropped again to $133. The price again rose, but then in May, it kept dropping.
For instance, at the start of May 2021, Filecoin was worth about $164, according to CoinDesk. However, by the middle of the month, it had dropped down to $111. FIL rose to $113 in September but it's currently worth $65.
Let’s look at some of the predictions so you know whether you should buy now or wait for a little.
Filecoin Price Prediction for 2021
Usually, when there is a correction, most crypto price analysts adjust their prices to reflect the current price movement. When Filecoin hit its current all-time high most people were hopeful that it would close the year at above $350.
But now, with the price 70% down, that optimism seems to have fizzled out. For this reason, most price forecasts have been updated to reflect a much bearish future outlook.
For instance, Wallet Investor initially predicted that Filecoin would close the year at a yearly high price of 351.626. However, that price has now come down to $120.157 or an average of $74.890. This is still an optimistic forecast, given that the asset is now selling at $65.
Long Forecast is even more bearish as it predicts that Filecoin FIL could close the year at less than $100. This is a huge drop from its previous prediction of up to $266 by December 2021.
Long Forecast is usually conservative and tries to keep its predictions closer to the current price. The altcoin will close the year at $51.3 in December.
Trading Beasts has also downgraded its previous predictions to reflect a much bearish outlook. Keep in mind that Trading Beasts has always been bearish about Filecoin. For instance, even when FIL was at its highest price, TB still gave a low prediction for the end of the year.
It now believes that the coin will sell for $75.055 by December 2021. In other words, Trading Beasts doesn’t think that FIL will be hitting a new ATH this year.
Even with the high volatility being recorded, Filecoin could still be a good investment in the long run. If you still want to go ahead and invest, below are the different ways you can do so.
Don't Miss: Filecoin Price Predictions
Different Ways to Invest in Filecoin
Being among the newest coins in the market, it is surprising how fast Filecoin has grown in a matter of months. We believe that this is among the best investable assets, especially for people who can’t afford pricier coins like Bitcoin and Ethereum.
If you choose to invest in Filecoin, there is more than one way to do it. We recommend the following three methods:
- Hodling for the long-term
- Investing in the Filecoin technology or startups
You can choose to go with all three methods, do a combination of two or just choose one. Whatever you decide, we are going to show you how to go about each method.
If you are going to hodl or trade Filecoin, you will need to first buy it. Now, being a new coin, Filecoin is not listed in most exchanges. However, you will still find a few brokerages and exchanges that support it.
Now that you have some FIL tokens let’s look at the different ways you can invest in Filecoin.
Whichever exchange you choose, the process of buying FIL is fairly the same. Let’s quickly go through it below.
Method 1: HODL Filecoin
This is where you store your Filecoin FIL in an external wallet for a long period of time. The point is to wait for years until the price of Filecoin is high enough to be massively profitable. HODLing can take several years, and we recommend it for newbies who don’t want to go through the complexities of trading.
If you are going to HODL, make sure that you immediately transfer your tokens to a secure off-exchange wallet. Holding FIL on your exchange is not a good idea since these exchanges are vulnerable to hacking, and you might lose your investment.
Method 2: Trade Filecoin FIL
Trading is one of the best ways to make quick profits with Filecoin. If you are not willing to wait for years before you can start enjoying your investment, we recommend this method for you. However, trading can be a bit complex and risky, especially if you are new to the game.
So. if you don’t want to lose all your investment in the process, you can either decide to hodl or find someone to trade for you while you learn the ropes.
What we love about trading is that you can profit from both price directions by making a short or long position. You can also use leverage to amply your profits. We usually don’t recommend overdoing leverage since it can also amplify your losses.
Method 3: Invest in Filecoin Technology/Startups
Most cryptocurrency investors do not bother with this method. It is an advanced investment strategy that may involve a lot of exhausting legal paperwork, so we only recommend it for seasoned institutional or angel investors.
If you believe in the underlying Filecoin technology, you can choose to invest in it instead of directly investing in its FIL token. This way, it would be like you are investing in the company itself and not the cryptocurrency.
Alternatively, you can also invest in Startups that directly rely on Filecoin. As Filecoin becomes more successful, so will these startups. So, investing in this way would be a great way to profit from Filecoin’s success without actually buying any tokens.
Read More: How to Invest in Filecoin
How to Buy Filecoin
As we mentioned, the process of buying Filecoin is similar for most exchanges or brokerages. Just follow the steps below:
- If you haven’t already, open an account with the exchange, you will be using. Follow the instructions to complete your profile before moving to the next step.
- Get a wallet. If you will be holding Filecoin for the long term, we recommend getting an off-exchange wallet to securely store your investment. Otherwise, if you plan on actively trading, there is no need to invest in a wallet.
- Deposit funds into your account. Each exchange has a minimum amount you will be required to deposit.
- Buy FIL. After depositing funds into your account, you can now proceed to buy FIL by following the procedure on the exchange you are using.
- If you are going to hodl, you can transfer your FIL tokens to an external wallet. Otherwise, if you want to trade, just leave it on the default exchange wallet.
Is Filecoin a Good Investment?
Depending on whether you want to trade or hold, Filecoin might be a good investment right now.
This answer is a bit ambiguous, but given Filecoins recent dip, there is not a definite answer to this question. Although some price analysts are positive that the price will rise sometime next month, it could have a tough time breaking through the resistance level.
For this reason, we cannot tell for sure if the price will rise again or not. If you are looking for instant gains, hodling right now might not be a good option. However, if you are trading, you can take advantage of the price fluctuations and enjoy some short-term gains.
Filecoin is also good as a long-term investment. However, it might take some time before you can see any good profits. If you buy now and the price manages to hit, say $1,000 by 2025, you will make good profits. Otherwise, the outlook is not so good for the next few years.
Looking at the price history, you can tell anyone who invested when the price was as low as $20 and sold during the ATH made good money. For instance, if you bought $1,000 worth of FIL when the price was $20 (that is around August 2020), you would have 50 tokens.
Now, if you sold these when the price reached $230, you’d easily make more than $10,000 in a few months.
Will Filecoin Rise Again?
Before the recent correction that saw the price dip by more than 70%, Filecoin was on a promising uptrend that briefly positioned it among the top 10 biggest cryptocurrencies in the world. Experts believe that the same factors that boosted the Filecoin price before the crash will help it rise.
According to CoinMarketCap, FIL’s fully diluted market valuation is about $7.5 billion, which is a drop from its highest FDV of $450 billion. The coin showcased remarkable growth in the months following the April/May price correction.
The price is currently down 70% down from its ATH but shows promising signs of a healthy rebound. Now, there are several factors that we believe were directly responsible for FIL’s growth and will equally help it look up again.
The first is increased interest from institutional investors. For instance, big investment firm Greyscale recently added Filecoin to its portfolio. This helped boost the price of the token by 40% in about 48 hours.
There is also massive support for Filecoin from China, a country that is mostly known for information secrecy. When FIL hit its all-time high of $236.84, high trading volumes were recorded from Huobi, China’s largest trading exchange. According to reports, Huobi recorded as high as $24.2 billion 24-hour trading volumes.
Most of the storage miners on the Filecoin network are also based in China. OKEx, a Seychelles-based cryptocurrency exchange, reports that more than 95% of Filecoin’s nodes are made up of Chinese miners. This is probably because Filecoin is cheaper to mine compared to Bitcoin.
These and a few other factors will help rejuvenate Filecoin’s growth and set it on another uptrend.
Check Out: Why Filecoin Is Going To Explode
Conclusion: So, Should I Buy Filecoin?
Whether or not you should buy Filecoin depends on your risk tolerance and investment goals. Do you want to hodl for the long term, trade or simply invest in the underlying technology? How much are you willing to risk in the process?
Looking at your goals for investing will help you make a more sound decision. Just because an asset is growing quickly doesn’t mean it is the right fit for your portfolio.
So, we recommend that you do some research, look at the technical and fundamental analyses then decide for yourself if Filecoin is the right buy.
Otherwise, if you are looking for long-term monetary gains, you might want to buy Filecoin while the price is low. It might soon rise and surpass its current ATH, so right now is a good time to buy.
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Will Filecoin price go up?
Based on the technical analysis, the price of Filecoin could rise in the next few years if it breaks through its resistance level early enough.
Will Filecoin Reach $300 in 2021?
Most analysts have updated their predictions to reflect the slump after FIL hitting its all-time high, most initially believed that the coin would comfortably close the year at over $300.
What will Filecoin coin be worth in 2025?
According to the most bullish predictions, Filecoin could hit the $1,000 mark by 2025. Otherwise, we can expect something between $500 to $1,000