The fully diluted valuation of Filecoin (FIL), a digital payment and cryptocurrency system built on top of the InterPlanetary File System (IPFS), has reached $450 billion.

Filecoin is a blockchain that enables users to rent unused hard drive space to store and retrieve data. Its model is similar to Snowflake, which completed the biggest software IPO in history in September 2020.

A combination of three factors likely led the price of FIL to surge in recent weeks: technical momentum, rising demand from China, and its uniqueness compared to Ethereum.

Analysts say big demand is coming from China

According to Wu Blockchain, a crypto-journalist based in China, the demand for FIL has been heating up in China.

The daily volume of FIL on Huobi, which ranks as China’s largest cryptocurrency exchange, reached $24.2 billion. The journalist said:

“China is crazy for Filecoin, with a 24h increase of more than 30%, reaching a maximum of $236. The 24h trading volume of FIL in Huobi, China’s largest exchange, reached $24.2b, nearly three times the volume of the second ETH $8.8b, Bitcoin was $7.8b. FILDOWN, a short-selling leveraged token in Binance FIL, plummeted by 53%, with a turnover of US$3.4 billion, indicating a large number of short FIL liquidation in Binance.”

A plausible scenario could have been that a fear of missing out (FOMO)-like trend across Asian markets, including China, created a strong uptrend led by the derivatives market.

As the demand started to spike in China, the open interest of Chinese futures exchanges rose, eventually flowing into global futures trading platforms.

Technical momentum is strengthening

When the price of FIL began to increase, the open interest across major futures exchanges began to increase rapidly.

According to the data from Bybt, within 24 hours, the open interest of Filecoin increased by 46.37%.

A pseudonymous trader known as Waro explained that when a cryptocurrency sees a strong uptrend like this, it is difficult to catch a top.

Many traders attempt to predict the top, which leads to short position liquidations and this causes a short squeeze that adds fuel to the rally. He said:

“I may not understand why $FIL keeps pumping but what I do know is trying to catch a top is suicide more often than not. For those that don’t understand that tweet: The likelihood of you getting murdered trying to catch a top short is higher than you shorting the top.”

FIL eventually saw an abrupt short-term top, falling 23% within merely 45 minutes across major exchanges.

Ethereum’s momentum could be a catalyst

James Spediacci, an Ethereum analyst, said that he continuously emphasized over the past four years that Filecoin brings uniqueness as a layer one blockchain that others struggle to as a competitor of Ethereum.

Spediacci explained that decentralizing cloud storage with IPFS is an innovative technology that actually adds value to the blockchain space. He said:

“I’ve been saying this since 2017: ‘Filecoin is the only other blockchain besides Ethereum that actually adds value to the world by decentralizing cloud storage with IPFS and it is complimentary to Ethereum.’ If you dumped your $FIL at $20, you’re not going to make it.”