One of the newest cryptocurrencies, chia (XCH) launched in early May. Blockchain developer Chia Network is going public as early as this year, capitalising on calls for cryptocurrencies to reduce their carbon footprint to gain mass adoption. Chia claims to be building an eco-friendly cryptocurrency on an environmentally sustainable blockchain.
What is chia crypto and how does it work? Is Chia Crypto Network a scam or legit? Should you consider investing in the stock when it goes public or trade the native cryptocurrency now?
This article looks at the latest developments of the project, everything we know about the Chia Network IPO and forecasts for the coin price.
What is Chia Network all about?
Founded in August 2017, Chia Network is a blockchain and smart transaction platform created by Bram Cohen, the inventor of the BitTorrent peer-to-peer file sharing protocol. Executive leaders include Gene Hoffman, the former founder and chief executive officer of eMusic.com and subscription management firm Vindicia, and Mitch Edwards, the former acting-CEO of online retailer Overstock.com.
Rather than the energy-intensive Proof-of-Work (PoW) algorithm that Bitcoin and other blockchains use to process transactions and mine coins, Chia is a storage-based protocol running a “Proof-of-Space-and-Time” (POST) algorithm that uses unallocated disk space. The chia token is the native cryptocurrency that runs on the blockchain.
How does chia (XCH) crypto work?
As the POST approach does not use computing power, it does not require energy to create coins. Miners allocate their spare storage space to the network, and the probability of farming a chia coin is proportional to the amount of space they are providing compared to the total capacity of the network. Chia is now the largest storage-related blockchain, surpassing Filecoin, according to Hoffman.
The nature of the POST algorithm makes it resistant to the development of mining pools, which helps the network to remain decentralised. POST relies on cryptographic protocols called Verifiable Delay Functions (VDFs), according to the Chia Network website. Designing implementations for the VDFs will help developers improve on the blockchain and cryptocurrency system.
The Chia Network blockchain uses Chialisp, a new programming language that is secure and easy to audit. The goal is to make cryptocurrency “easier to use than cash”. Anyone can download the software from the Chia website and start farming coins if they have enough storage space.
Chia Network supports the enterprise use of chia with software and chia lending. It aims to become a payment system for companies and institutions, including banks and governments.
Chia Network plans IPO
Chia Network launched the chia coin on 3 May 2021, and the company raised $61m in an investment round later in the month. The financing valued the company at around $500m, Bloomberg reported.
Executives at Chia Network plan to take the company public, either through an initial public offering (IPO) or a special purpose acquisition company (SPAC). The firm has set the goal to go public relatively soon, Hoffman told Bloomberg:
The Chia IPO date could come this year.
Investors in the company include Andreessen Horowitz, Greylock Partners, True Ventures and Galaxy Investment Group. The latest funding round included Andreessen and Richmond Global Ventures. David Frazee, managing partner at Richmond Global Ventures, said that chia coin is secure, complies with regulations and can be audited, Bloomberg reported.
Social media users have expressed concern that the supply of XCH coins is pre-mined, which raises the possibility of so-called “pump and dump”, whereby the price is driven up and a large supply of crypto coins sold on the market, crashing the price while the original investors offload their holdings for profit. There are also concerns that the accessibility of mining the coin by simply downloading software will cause a shortage in hard drives and drive up costs.
Chia coin price analysis: crypto selloff weighs on launch
The chia cryptocurrency (XCH) price has been volatile since it launched less than a month ago, reflecting turbulence across the cryptocurrency markets in May. The coin launched at 1,595.04 against the US dollar on 3 May and traded between $745.79 and $1,934.51. It moved down to $561.89 on 6 May, climbed to $1,443.56 on 8 May, then dropped back below $1,000 to $903.23 on 10 May.
The price reached $1,692.62 on 14 May, but has since declined, trading between $700-800 in recent days.
Cryptocurrency prices have come under pressure amid concerns over increased regulation in the US and China, and comments on social media from Elon Musk about the environmental impact of crypto mining. Chia has not been immune from those moves.
But what is the outlook for chia coin's future value? Will the price rebound and set fresh highs?
Chia coin price forecast: what is the long-term outlook?
In its chia (XCH/USD) forecast, online forecasting service Wallet Investor predicts the price will climb from $667.63 at the start of July to $1,240.75 at the end of December 2021, and almost double to $2,248.98 by the end of 2022. Longer term, it projects the price will reach $4,453.27 at the end of 2025 and $5,084.41 by late May 2026.
Digitalcoin is less bullish in its chia crypto price prediction although it still expects the price to climb in the coming years. It forecasts that the coin price will average $1,190.04 in 2021 and $1,327.29 in 2022. Further out, it predicts the price will reach an average of $2,356.10 by 2025 and $3,566.34 in 2028.
The deep learning-based forecast from Gov Capital is bearish on the future of the coin in its chia coin price prediction, forecasting that although the price could rise to the $1,200 level a few times in June, it will ultimately drop to zero by the end of the month.
Technical analysis from CoinCodex is also bearish. There are 13 technical analysis indicators giving bearish signals, compared with only five offering bullish signals. The 3-day to 21-day simple and exponential moving averages are bearish, while the relative strength index and stochastics are bullish.
With the chia price trading around $783.74 on 30 May, there was technical support at $768.40 down to $735.21, with resistance at $801.59 to $834.78, according to CoinCodex.
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There are 21.7 million chia coins in circulation. A total of 723,712 coins have been farmed since the 3 May launch as of the time of writing, according to Chia Explorer.
When deciding whether to invest in highly volatile assets like cryptocurrencies, it is especially important that you do your own research to determine if it is a good fit for your investment portfolio. Whether chia is a good investment for you depends on your risk tolerance and how much money you plan to invest. The principle that you should never invest more than you can afford to lose is crucial when trading cryptocurrencies.
Depending on how the protocol develops, the chia crypto could rise in value over the next five years. The price in the future will also be influenced by the volatility on the broader cryptocurrency markets.
You can buy and sell XCH on several exchanges, including DigiFinex, Huobi and OKEx.
While chia is currently not available for trading on Capital.com, the platform gives you access to a wide range of other popular cryptocurrencies, from BTC, ETH and XRP to ADA, DOGE and DOT, through contracts for difference (CFDs).
Trading CFDs offers the opportunity to capitalise on both bullish and bearish price fluctuations. You can either hold a long position, speculating that the price of a cryptocurrency will rise, or a short position, speculating that it will fall.
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Be aware that CFD trading involves leverage, which magnifies not only profits but also losses if the asset price moves against your position.