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Why Cryptocurrency Filecoin Is Plunging Today

By Zhiyuan Sun – Sep 7, 2021 at 11:10AM

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This is one deeply intriguing yet overvalued token.

What happened

Filecoin (FIL -0.91%) is down 10.23% in the past 24 hours to $99.13 per token as of 10:17 a.m. EDT on Tuesday. Investors are locking in profits after a stellar bull run sent Filecoin soaring 30% in the past seven days.

Filecoin is a decentralized storage token created by Protocol Labs in 2014. Think of it as self-storage for digital assets. Through its novel proof of replication and proof of spacetime consensus protocol, nodes on the network verify that they are pledging their disc space for users to rent for a specific length of time. They then compete with other nodes to ensure customers are getting the best price possible and receive deal fees in the process in the form of Filecoin tokens.

Concept of an artificial intelligence network in cyberspace.

Image source: Getty Images.

So what 

After a series of delays, Filecoin's main network finally launched in October of last year. The blockchain platform has scaled monstrously since then. Right now, hundreds of Filecoin nodes are providing 12 exabytes (or 12 billion gigabytes) worth of data storage, which is roughly equivalent to the entire storage space of Alphabet's Google Cloud in 2017. So there's definitely a lot of potential for it to grow.

Now what  

Unfortunately, while the supply is there, the demand hasn't really caught up. Since launch, the network has only seen 2.4 million storage requests, not users, which is pretty small. Meanwhile, the token's market cap has skyrocketed to $10 billion, so it was long due for a correction. But keep Filecoin on your watch list in case one day it falls low enough for bargain hunting. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Zhiyuan Sun has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.

Stocks Mentioned

Filecoin Stock Quote
Filecoin
FIL
$4.41 (-0.91%) $0.04
Alphabet Stock Quote
Alphabet
GOOG
$93.07 (-0.94%) $0.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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