Leading decentralized storage protocol Filecoin (FIL) undertook a magnificent 75% rally over the weekend.
This marks a break to half a year of suppressed price action for the once highly prized cloud-storage asset.
Filecoin is currently trading at $8.59 (+1.45% in the last 24 hours).
February 17 saw a huge breakout from the consolidatory price action that had ranged from $5.00 – $5.50 for over a month.
As Friday evening arrived, hammering green candles started to paint across the chart, riding high on the back of the push up to $24,500 by Bitcoin (BTC) last week.
The rally continued all weekend until it finally stalled just shy of $10 on Sunday.
This is a level not seen since August 2022 – more than six months ago.
Reclaiming the $10 mark is a key target for FIL, which is down to single digits, a fall from grace for a coin once trading at $237.
Localized price action over the past 24 hours is reeling as bulls rush to gather support and consolidate the newfound gains.
Indeed, consolidation does seem to be finding legs around $8 – a minor retracement of -10% from the local top.
With price action firmly glued to the top of FIL’s trading channel, sentiment seems bullish.
Could Filecoin (FIL) rally push higher?
However, looking at the indicators challenges this theory.
The RSI 14 pushed to the extreme as it heated up during the weekend rally. Hitting a scary top of 85 – this was a clear overbought signal.
And things haven’t calmed down yet. Despite the local retrace and supportive consolidation, the RSI hasn’t cooled off significantly, still sat high at a current 76.
This is a clear bearish signal and could indicate a drop-down to test the lower support trendline. The lower trendline hasn’t been tested in almost an entire week.
Filecoin’s MACD further solidifies this angle, with this indicator too showing bearish divergence. The local retrace has seen the MACD drop from soaring heights at 0.162 on the weekend, to -0.023 now.
Despite the bullish rally and Filecoin’s historically-demonstrated upside potential, localised action seems to signal the potential for a breakdown to test support further.
The downside risk from here is not insignificant, with a fall likely to land back at the lower support level around $5.50. This would represent a -34.96% move to the downside.
Upside potential if $10 can be flipped to support is not insignificant either, with historical resistance levels from May 2022 suggesting $11.50 could be the next stop (+35.98%).
Overall then, Filecoin’s short time frame (STF) Risk: Reward ratio sits at 1.03. With upside potential and downside risk roughly proportional – this is a 50/50 toss-up. It could be worth waiting for a better entry.
Why is Filecoin (FIL) exploding?
Crypto markets over the past two weeks have been overtaken by the notion of a ‘Chinese crypto’ narrative.
This has seen investors rush into ‘Chinese coins’ on the back of growing macro sentiment surrounding regulatory easements for crypto in Hong Kong (VASPs) and the Chinese government’s teasing of imminent quantitative easing.
Indeed, massive liquidity injections by the People’s Bank of China have coincided with a surge in Chinese crypto projects.
Consequently, crypto projects popular with Chinese development teams have soared, with Filecoin (FIL), Polkadot (DOT), and VeChain (VET) all posting impressive rallies on the weekend.
But this narrative could be misplaced.
Last week, the world’s largest video game company Tencent (Chinese) fired its entire metaverse department. 300 staff laid off, only months after a multi-billion investment.
And this narrative is despite serial crackdowns against crypto by Beijing. Which has sought to pursue a two birds; one stone policy against the crypto industry, with China’s Bitcoin ban both asserting the supremacy of the new digital yuan CBDC and reducing pressure on a strained national power grid.
What is Filecoin (FIL)
Filecoin (FIL) caught headlines during the 2021 bull run, as it pushed up to eye-watering heights above $200.
This has cemented the project in the top 25 cryptos based on market cap, with FIL currently ranking as the 22nd largest cryptocurrency.
The decentralized protocol enables users to rent out storage space on their personal devices. Built using open-source coding, the goal here is to create a decenteralized ‘cloud’ that could rival heavily centralized data-centre players.
The Filecoin network comprises three key mechanisms – storage mining (offering storage), retrieval mining (processing data queries across the network), and clients that lease the storage space.
Buy FIL Now
Is Now A Good Time to Buy Filecoin?
While FIL is due a substantial rally at some point in the future, this may not come for several months. So if you’re looking for other high-potential crypto projects alongside FIL, we’ve reviewed the top 15 cryptocurrencies for 2023, as analyzed by the CryptoNews Industry Talk team.
The list is updated weekly with new altcoins and ICO projects.
