Filecoin (FIL) has seen a 65% gain over the past 30 days to hit its highest price since June 8th. Its latest strength was accelerated after a partnership with Chainlink’s Oracle protocol on Aug. 6 allowed projects to join their funding initiatives to accelerate the development of hybrid smart contracts to leverage code that runs on the blockchain, while the data computation process is managed out of chain.
Numerous events triggered the all-time high of $ 235 on April 1, but that move is clearly long gone as the cryptocurrency is 67% below that level. Let’s take a moment to understand what started the rally and whether these drivers are still around.
China-based mining activities have raised investor expectations
Filecoin is a decentralized cloud-based data storage network that enables its users to receive rewards for selling their excess storage on an open source platform. The built-in economic incentives ensure that files are reliably stored over time.
The network’s storage capacity exceeded 2.5 exabytes in February, leading to positive comments from influencers like Cameron Winklevoss, the billionaire investor and co-founder of the Gemini exchange.
The amount of network storage power, active miners, and Github contributors continues to grow on the @Filecoin $ FIL network. No wonder prices are skyrocketing. pic.twitter.com/0Ua77UJlgl
– Cameron Winklevoss (@cameron) March 17, 2021
On March 17th, Grayscale Investments, the digital currency asset manager behind the GBTC Trust, announced the launch of its Filecoin investment vehicle.
On March 25, a $ 23 million Filecoin Ecosystem Fund was announced, backed by major Chinese investment groups such as Fenbushi Capital, SNZ Capital and Neos EcoFund.
New smart contract features are expected and the daily edition of FIL has been shortened
On March 31, Qtum founder Patrick Dai said the protocol was working to enable smart contracts for Filecoin over the Qtum network.
On April 10, Martin Gaspar, a research analyst with the CrossTower exchange, told Cointelegraph that solid demand from Chinese miners had emerged due to a lack of proof-of-work facilities. Gaspar added that these miners “need to pledge the FIL token as collateral, creating a demand for the token”.
Finally, on April 15, Filecoin changed its supply economy and reduced the daily output from 648,000 FIL per day to 365,000. The drastic cut probably led to a perception of the scarcity of the token. This, in turn, could have resulted in retail investors and miners accelerating their investments ahead of the event.
Data shows that retail activity has picked up
Perpetual futures contracts, also known as inverse swaps, have an embedded interest rate that is typically calculated every eight hours to ensure there are no imbalances in currency risk.
Whales, arbitrage desks and market makers avoid exposure to these instruments due to their variable funding rates. When longs (buyers) demand more leverage, they pay the fee. The opposite is true when short sellers (sellers) use more leverage, resulting in a negative funding rate.
The data above clearly shows that the funding rate rose sharply between August 10th and August 17th, reaching a positive average of 0.08%. This figure equates to 1.7% per week, which indicates increased leverage long activity. After falling for a few days, the indicator initiated another hike to a 0.10% fee charged by longs every 8 hours.
The current 2.1% per week fee indicates even greater leverage from retailers, which means optimism. Of course, there’s no telling if the recent move is enough to trigger continued price improvement, but traders seem to believe that $ 100 is closer than ever.
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