The cryptocurrency market has had a tough week overall. However, altcoin projects related to decentralized storage protocols took the hardest drops. The business model in question is new and not yet proven. However, the industry is taking a hit as investors seek safer investments and worry about crypto regulation. The famous financial company, on the other hand, said that these altcoins should be careful.
These altcoin projects lost a lot of value
Altcoin projects related to decentralized storage protocols have suffered huge drops over the past week. The most popular of these altcoins, Chain (XCN), Filecoin (FIL) and Arweave, attracted attention with their depreciation. The general concern this week was that decentralized storage protocols don’t actually offer any benefit over traditional cloud offerings. Chain (XCN) has partnerships with sports leagues. Tiffany even directed some of the NFT launch. However, it did not attract much attention. It also suffered more than others as investors questioned how many chains are really needed for storage.
Filecoin faces a similar challenge as investors question the long-term usefulness of the token. Arweave is under similar pressure but is more widely used. Thus, it retains its value. Regulatory efforts, which became more likely with the collapse of FTX, gained momentum. Lawmakers and regulators are working to rein in the industry. But crypto uses such as file storage may not pass regulatory laws. The challenge for file sharing and data storage protocols is that they require a network impact and high valuation to be viable.
Some weaknesses of the industry are emerging
In other words, if people are not using their tokens to pay for services, the value of the token itself will collapse. This creates a downward spiral as quickly as an upward spiral during a bull market. In reality, these services will not be much more useful than the standard cloud services that the industry has found the hard way.
Investors are examining the long-term viability of some crypto business models. However, the true decentralization and stability of some of these networks may not be as strong as initially hoped. According to The Motley Fool, what happened this week represents the market’s questioning whether this pattern makes sense. There are numerous cloud providers for all kinds of data and they are relatively inexpensive to use. Decentralization is a good idea. But in practice this will be difficult to achieve. It also makes sense for altcoin projects to lose value if users and investors are losing their faith. It had no effect on the overall decline of the market. This may be revealing some of the industry’s weaknesses.
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