Could Filecoin join the top cryptocurrencies in 2022?

The Filecoin (FIL) price has rocketed by almost 250 percent year-to-date driven by news that cryptocurrency investing giant Grayscale has launched a Filecoin investment trust. The blockchain-based file storage network has been recently attracting increasing interest, particularly in China.

Have you heard of Filecoin? Are you looking to understand what makes it different from other digital coins? And if you are considering investing in this cryptocurrency, what next for the Filecoin price?

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This article gives an overview of the protocol’s latest developments and whether forecasts predict the Filecoin uptrend to continue in the coming years.

What is Filecoin?

Coming out of test mode in October 2020, Filecoin is a peer-to-peer network developed by Protocol Labs where users pay competitive prices to storage miners to ensure their files are stored correctly and safely over time. The Filecoin blockchain records transactions to provide verification of file storage and transfer the native FIL cryptocurrency.

Unlike other cryptocurrency miners, which receive coins in exchange for running complex calculations to verify transactions, Filecoin miners receive FIL coin in exchange for providing computer storage. Storage miners are defined as any individual or organisation with spare disk space on an internet-connected computer.

Filecoin effectively facilitates the creation of an open market for file storage. Users can choose among miners to find one that offers the best balance of cost, speed and redundancy to meet their needs. The Filecoin protocol removes the need for each provider to create a different application programming interface (API) or advertise their offering, reducing barriers to entry and creating a decentralised environment of independent providers.

The Filecoin protocol is enabled by Web3, the next-generation Internet, where decentralised platforms give users, rather than centralised applications run by large corporations, control over their data. That allows them to share files with peers over a network like Filecoin, reducing the risk of denial-of-service attacks and censorship.

At the time of writing, March 24, FIL was the 20th largest cryptocurrency by market capitalisation, with a value of $4.95m. There are currently 59.85 million coins in circulation, representing just 3 per cent of the total of 2 billion.

Filecoin attracts mining interest

The Filecoin concept taps into the trend of rising data centre capacity, as the rollout of high-speed 5G telecom networks enables the transfer of larger data files, and as content creation and streaming services continue to grow.

The developers announced a co-mining pilot on March 23 with decentralised video streaming network Livepeer, to allow Filecoin miners to also become Livepeer video miners by storing transcoded video data.

Chinese company Wanxiang Xinyuan Technology, a subsidiary of technology conglomerate New Universal (Newu), said on March 15 that it has an $89m agreement with Jiangxi Shixing Technology for the supply of computer servers and data storage equipment to mine Filecoin. The equipment will be connected to the distributed interplanetary file system (IPFS) on which Filecoin runs. The first batch of equipment delivered will include 500 servers and 100 storage systems.

Grayscale, which runs a range of trusts that enable investors to gain exposure to cryptocurrencies in the form of securities, announced on March 17 that it was adding a Filecoin trust and four others to its lineup, which already included larger cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC).

Filecoin has seen its share of controversy since it launched in October. Some miners were reported to have suspended operations in response to Filecoin’s economic model, as they were required to stake a large number of tokens as collateral to get started. A lack of liquidity and a sharp rise in the FIL price pushed miners to borrow the coin at high interest rates to participate, having bought costly computing equipment to meet the mining requirements.

FIL was listed on several cryptocurrency exchanges, including Gemini, Kraken and Huobi. The coin launched at a price of around $30 on October 14, 2020, spiking to $63 the following day, then slipping to $22.49 by October 22. The price returned to $36 on October 25, then fell back to trade between $28-$30 until late December when it dropped to the $21 level.

The cryptocurrency remained relatively stable into 2021 until February 9, when it climbed to $48.21 from $27.57. It dipped to $34.60 on February 26, then began its run up to a new FIL all-time high, rising to an intraday high of $96.17 on March 17 in response to the Grayscale announcement. The price subsequently dropped back to close at $82.45 on March 23.

On March 17, there was a “double deposit” of Filecoin, crediting the account of a miner twice. The proof-of-work algorithm that secures cryptocurrencies was designed to prevent spending the same funds twice, indicating that there was a bug in the Filecoin code.

Filecoin price prediction: will the coin trend higher in 2021 and beyond?

Cryptocurrency data site Digitalcoin offers a bullish Filecoin price prediction for the coming years. It predicts the price will average $120.74 in 2021, rising to $137.61 in 2022, $164.73 in 2023 and $234.39 by 2025.

Stock, forex and cryptocurrency online forecasting service Wallet Investor is also optimistic about the Filecoin price in the future. Its FIL coin prediction puts the price at $83.708 by the end of April 2021, rising to $110.56 by the end of the year, $150.61 by the end of 2022 and $279.48 by March 2026.

According to Coincodex, technical analysis indicators including the simple and exponential moving averages, are presenting bullish signals. There is resistance up to $98.32, with support at $76.36 and down to $65.38.