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Yesterday, after years of waiting, Filecoin (FIL) finally launched, Funded by legendary venture capital companies like Sequoia Capital, Andreessen Horowitz, and Union Square Ventures, the project is a blockchain-based data storage and data recovery network. Users can pay FIL to store their files on secure storage miners, which facilitate the network.
The project, like many other hyped-up coins, launched at absurd valuations. The cryptocurrency quickly spiked above $100 on the exchanges that supported it, meaning it had a fully-diluted market capitalization in excess of $200 billion — yes $200 billion.
Filecoin has begun to crash as investors have realized that it may be overvalued on a long-term basis. Short positions have been opened en-masse, driving the coin dramatically lower on futures exchanges such as Binance and FTX.
Related Reading: Here’s Why Ethereum’s DeFi Market May Be Near A Bottom
Filecoin Crashes on Top Exchanges
Filecoin has crashed dramatically since trading began yesterday on top exchanges such as Kraken, FTX, Binance, and many other exchanges. The coin is down 35% in the past 24 hours as per CoinGecko, but down over 75% from its all-time highs set during the FOMO period yesterday.
Chart of FIL's price action over the past day. Source: FILUSD from TradingView.com (Kraken data)
It appears that Binance is catalyzing much of the selling pressure.
Analysts have noted that Filecoin futures on the exchange are being shorted en-masse because the funding rate limit of -0.75% per eight hours has been reached. This means that investors can short the asset at a relatively low cost relative to other exchanges, where the funding rate cap may be even lower. This mass shorting is thus driving the cryptocurrency lower.
It’s worth noting that there is a short squeeze taking place. FIL futures on Binance have jumped around 30% since the daily lows, with shorts finally getting squeezed out of their positions.
Related Reading: Tyler Winklevoss: A “Tsunami” of Capital Is Coming For Bitcoin
Where Will the Bottom Be?
While a short squeeze is taking place, analysts aren’t betting on a long-term rally for FIL. Brian “Ledger Status” Krogsgard recently noted that there are two billion FIL coins that will meet the market over time, making it illogical that the prices in the $30-100 region will last for long.
There are 2 billion $fil that will meet circulation over time.
Every single investor LOVES these prices. Filecoin is playing hot potato before a very long and painful march down. Beware.
— Ledger 🇺🇸 Prometheus of the Plebs (@ledgerstatus) October 15, 2020
Related Reading: 3 Bitcoin On-Chain Trends Show a Macro Bull Market Is Brewing
Featured Image from Shutterstock Price tags: FILUSD, FILBTC, FILETH Charts from TradingView.com Prominent ICO Filecoin (FIL) Dives 30% as Short Exposure Explodes
