Helium Network Passing Half-Million Hotspots Could Fire Up HNT Price

The Helium Network, a crypto-powered distributed network of long-range wireless hotspots, has amassed over half a million miners across the world in just two years and is expected to cross the 1 million mark in the next six months.

Now, some crypto-market analysts are asking if Helium’s HNT token is poised to rise in value – and what the risks might be.

A Helium hotspot is a small device that plugs into a regular electric outlet, taps into existing internet service and extends that Wi-Fi for miles – providing a connection to local devices as well as acting as a node on the network. Hotspot owners are rewarded in cryptocurrency – the HNT tokens – for operating the hotspots.

Helium uses a "burn-and-mint equilibrium" token model, with two units of exchange: HNT and Data Credits (DC). Users wanting to use the network to transfer data use DC, which is set at a fixed rate of $0.0001 per byte of data. When DC is acquired, HNT is burned — reducing the supply of HNT.

So that's what might drive appreciation in the price of HNT: Greater usage of the network would theoretically make the tokens scarcer, and thus more valuable.

Sean Farrell, vice president of digital asset strategy at Fundstrat Global Advisors, told CoinDesk in an interview that based on node growth and adoption, “people might be underestimating how quickly Helium could take the market share from incumbent wireless carriers over the next few years.”

Helium’s HNT token has been trading in the $20-$40 range since the start of the year and is down 32% in the last three months. HNT reached an all-time high of $54.81 in November when bitcoin also reached its all-time high of $68,700. The price is currently around $26, according to data from Messari.

Looking at the current wireless market, Farrell expects the value of holding tokens in the Helium network to be valued higher than equity in a wireless carrier.

He compares Helium with T-Mobile, which currently has the largest existing 5G network and a market capitalization north of $150 billion. Helium currently has a market cap of $2.9 billion.

“Even this comparison falls short since a significant advantage of the network is the decentralization of hardware costs,” said Farrell. He added that the distributed nature of the Helium network also allows for expansion into geographic areas that would otherwise be unprofitable.

“Hence, the market potential for Helium is likely larger than the existing wireless market,” said Farrell.

At the current pace of growth, the network is adding 80,000 new hotspots monthly, according to Frank Mong, Helium’s chief operating officer.

Farrell said that a significant damper for the price right now is the cryptocurrency's general availability to U.S. investors – possibly introducing the risk of regulatory intervention under applicable securities laws.

The U.S. Securities and Exchange Commission defines securities as fungible, negotiable financial instruments that represent some type of financial value, usually in the form of a stock, bond or option.

Securities and Exchange Commission Chair Gary Gensler has previously said: “I think that the securities laws are quite clear. If you’re raising money from somebody else, and the investing public has a reasonable anticipation of profits based on the efforts of others, that fits within the securities law."

“It’s possible that [HNT] would be considered a security by the SEC and therefore is not listed on any domestic exchanges,” said Farrell.

When asked whether Helium was concerned whether HNT might be deemed a security, Helium’s Mong said, “We feel confident that our HNT incentive-based network serves a utility purpose to connect sensors to the internet. Ultimately, that is a question best left to a regulatory body.”

Coinbase, the biggest U.S. crypto exchange, does not currently list HNT. The token is listed on FTX’s international exchange and Binance.US.

Coinbase has flirted with the idea of listing HNT, but there has been no follow up so far. In July 2020 the company wrote in a blogpost it had added HNT as an “asset under review” and that it was “conducting engineering work to potentially support the assets.”

CoinDesk reached out to Coinbase to ask whether it had plans to list HNT this year and a spokesperson responded with, “We don't comment on specific assets.”

“I wouldn’t be surprised if Coinbase lists HNT soon,” said Gerald Votta, head of GameFi research at Quantum Economics. “With A16Z already having invested a lot of money in Helium, I think Coinbase will list eventually, '' added Votta. A16Z is shorthand for Andreessen Horowitz, a venture capital firm that's investing heavily in the crypto industry. In August, A16Z alongside others invested $111 million into the Helium Network.

"Helium represents an entirely new business model for deploying wireless networks at scale at a fraction of the cost," Ali Yahya, general partner at Andreessen Horowitz, said at the time in a statement. “Helium built and deployed an entirely new wireless network from scratch and achieved global adoption across more than 11,000 cities around the world in less than 24 months. It is the fastest rollout of a new wireless network ever, a truly impressive and remarkable feat.”

According to Votta, HNT is priced a little over fair value.

“This is because the only real use case for Helium is to use HNT to pay rewards to miners,” said Votta. “Until Helium adds more circles to its Venn diagram and has more utility, the speculators are in control.”

Adam Nasli, head analyst at international broker BrokerChooser disagrees with Votta's take, saying that Helium’s real-world use case gives the project a valuable edge.

“Through physical devices, hotspot owners provide wireless connectivity for real companies and real people,” said Nasli. Lime, the scooter- and bike-sharing company, uses Helium to track the locations of its units.

Farrell predicts that once Helium rolls out 5G miners, a few more partnerships and establishes on-chain governance, “the network will garner more retail attention and actual usage.”

In October, DISH, a U.S. direct-broadcast satellite provider, announced a partnership with Helium. The company was the first major carrier to use the Helium Network’s blockchain-based model with customers deploying their own 5G hotspots.

Votta predicts that after the DISH partnership progresses, the ecosystem will expand with multiple new use cases, pushing the price of the token up.

Nasli notes that some investors might still be hesitant about Helium because HNT’s value is largely driven by the wider crypto market, making it unpredictable and volatile. There is a strong correlation between the prices for bitcoin and HNT; over the last three months, the correlation works out to 0.8.

“This high correlation makes it unpredictable, affecting its value,” said Nasli.