In this newsletter, we are profiling Filecoin [FIL]. In previous newsletters, we have profiled Bitcoin, Cardano, Stablecoins, Uniswap and many others. Access all our newsletters in our archives at madcapx.substack.com.
The Short of It
Will Filecoin be the one? From the early investor interest, there is good potential they become the data storage king.
Filecoin (FIL) is a decentralized storage system first described back in 2014 as an incentive layer for the Interplanetary File System (IPFS) by the creator of both Juan Benet and Protocol Labs. Their stated aim is to “store humanity’s most important information.” Benet is an American computer scientist who studied at Stanford University.
With a mainnet launch in 2020, there is a max supply of two billion FIL, which is being distributed as rewards to nodes that provide storage and retrieval. Data is hosted and retrieved in a method similar to Bittorrent. Storage miner nodes are constantly competing for contracts to provide storage to clients for a specific length of time. Retrieval miners compete to serve clients with data as quickly as they can. FIL is also used as payment for renting storage space on the network. Filecoin incentivizes participants to act honestly and store as much data as possible.
The blockchain is based on both proof-of-replication and proof-of-spacetime. During storage deals, a node must periodically submit their proof-of-spacetime to the network, derived using randomness, the sealed sector and the proof-of-replication. These proofs provide a solid guarantee to the clients that the node has possessed a complete, unique copy of the data.
Filecoin claims to have the following attributes: resilient, efficient, accessible, programmable, trustless, verifiable and fully open-source. Data on the network is accessed via content identifiers (CIDs), which serve as digital fingerprints for every file and is called “content addressing.” This solves many issues with making sure the correct and verified data is fetched every time. Many apps have been built using the Filecoin ecosystem. Visit https://filecoin.io/build/ for information on building apps.
Running a node is rather expensive and resource-intensive, with minimums such as 8-core CPU, 32G RAM, 1 TB NVMe SSD and enough speed and room for approximately 38G growth daily. Visit https://docs.filecoin.io/get-started/lotus/installation/#build-and-install-lotus for information on running a Lotus node. Retrieval nodes get paid FIL rewards for fetching data, and storage nodes get paid FIL for fulfilling storage deals with clients. To prevent bad actors and cheaters, Filecoin imposes slashing on storage faults and consensus faults. This penalizes nodes that fail to provide reliable uptime or act maliciously against the network.
In April of 2020, Filecoin donated 50,000 FIL, worth ten million USD, to the Internet Archive. Internet archive's founder Brewster Kahle and director of partnerships, Wendy Hanamura, joined the boards of advisors of Filecoin and the Filecoin Foundation for the Decentralized Web.
Competitors in this space are Siacoin (SC), Bittorrent token (BTT), Maidsafe (MAID) and Storj (STORJ).
When Filecoin started trading back in October 2020, it shot up over 2400% against BTC and then over the next few months lost 97% of those gains. You won’t see that initial spike and fall on the chart below as it would flatten where FIL is today.
February 9th FIL has massive volume, and a little over a month later, Grayscale releases that they have launched a Filecoin Trust.
FIL is up 205% from March 15 to April 19, 2021. Since FIL hit bottom January to the peak in April, there was an increase of 680%.
Since the launch of the Grayscale Filecoin Trust, the share price of the trust has gone up 233%, with $8.4 million assets under management. The trust makes it simple for individuals to invest in FIL through their broker or investor accounts without having to buy and hold Filecoin.
A tradingview user posted the following, related to Filecoin as the Coin of the Week.
Technically, we are seeing a big consolidation for this pair in its way to new highs. The higher probability scenario is a short term down move to reach the support area and then continue the uptrend. The price might continue to go higher from here, although we consider this to be a lower probability scenario. If the price breaks the red trendline and consolidates above it, it will probably continue the uptrend. Best regards, Financial Flagship
The Other Trend Lines
LTC does not garner excitement in the crypto space. DOGE, BNB, and the DeFi projects and those that can create NFTs on their chains are getting the airtime.
But if you look at the graph on LTC over the last 8+ years, you will see a recurring pattern between halvings. The 3 white lines are the halvings. From the first halving, it was 19 months of downward momentum before LTC went over 500%. This past month you can see a tiny little spike of green for a 50% gain. Is LTC going to repeat and turn bullish finally against BTC?
Here’s a zoomed-in chart of the above on the daily. I’m looking for LTC to bounce off the previous resistance line, making it a support and then continuing upwards. I wouldn’t expect any huge daily candles anytime soon since the monthly candles in the above chart is where we are seeing the best gains. Having a small amount of LTC could be an option from these lows. But like DOGE that has a lot less or no real purpose, LTC could see its swing up for a great trade.
Peter Brandt, in the unchain podcast, talks about why he trades to accumulate BTC rather than USD or other fiat currencies, for that matter. So if you are wondering why we post mainly BTC pairs in our trend line areas is just that, stacking more sats, not USD. Our research looks for the ideal ways to do that.
If you wonder what happened with the Bitcoin crash yesterday, follow Willy Woo on Twitter to get his latest analysis on the situation. It was a buy-the-dip day.
Willy Woo @woonomic#marketupdate, breaking it down, post mortem. We just saw the single largest 1-day drop in mining hash rate since Nov 2017. The hash rate on the network essentially halved, causing mayhem in BTC price as it crashed. https://t.co/zzdgDikjXt
For the Ethereum fans:
Chicago-based Rothschild Investment Corporation recently bought 265,302 shares of the Grayscale Ethereum Trust (ETHE), and added just under 8,000 shares to its previous Grayscale Bitcoin Trust (GBTC) holding of 30,454 shares. At current prices, its GBTC holding is worth almost $2.0 million, while its ETHE holding is at $6.3 million. It’s not often we come across institutional asset managers that are more heavily invested in ether than in bitcoin, but I wouldn’t be surprised to see more of this going forward. — from coindesk
This portfolio section gives you an idea of what sort of return you can get when investing in crypto assets.
BTC/USD FUND is up 423% since October 1st, 2020. Since this is a long-term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long-term hold position as our best stable alternative. This past week bitcoin hit another all-time high and has been ranging between $50,930 and $64,850 USD in value. That range was almost $14,000 within a week; the low was after the high, a great buy the dip moment.
FUND 3 started on November 16, 2020, with $1000 USD in value and invested into BTC, LTC, ETH, and ADA. The total amount of BTC value from the four coins has a gain of 52% since the start. The USD fund value is up 417% since the start. We will hold these positions to see how well it does against our BTC-only portfolio. LTC is up 9% against BTC. ETH is up 42% against BTC since the start. ADA has a gain of 252% against BTC and 1082% to USD.
BLWX Fund started on February 22, 2021. They all are assets we have profiled in the last few months, and we are interested in how they will perform in 2021 against BTC. BAT has a gain of 124% against BTC since the start; LINK is up 21%, WAVES is up 13%, XMR is up 38%. Overall, against BTC, the fund is up 49%.
Overall, Bitcoin should be your first choice as an investment in crypto, though many altcoins can give you amazing gains if you manage your risk. As a long-term investor, we see it as our largest portfolio investment. If you are a day trader, there are many great assets to put on your watch list. Look through our previous newsletters to find some.
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Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.