cryptopolitan.com
Internet Computer’s token $ICP broke out to become the top AI narrative asset. Despite the slow altcoin and token performance, $ICP joined the list of recently awakening assets.
Internet Computer ($ICP) rallied to a three-month high, breaking out to $8.60 from recent lows. The token was down to $2.92 at the end of October after the month’s deep correction.
Over the past three months, $ICP is up a net 51%, though still below its yearly peak from January at over $15.30. $ICP reacted to the newly active AI narrative, causing a near-vertical price rally.
Internet Computer aimed to become one of the go-to chains, but was displaced by Solana and the new DeFi boom on Ethereum. Now, the token is trending along with a recovery for other AI tokens. As a whole, the AI token space expanded to a total valuation of $27B.
The current $ICP rally has been in the making for a few days, with mindshare growing by 191%. $ICP is still far from the leading networks, as the platform did not carry the latest trends in DeFi and DEX trading.
$ICP rallies with inflow of derivative traders
As with other mostly inactive tokens, $ICP reawakened on a sudden growth of derivative trading. Open interest spiked overnight to $162M. The market is relatively small compared to other assets.
Despite the delay of a real altcoin market, specific assets meet the conditions for strong directional moves. The widely available derivative markets take over, magnifying the rallies. For now, the fundamentals of $ICP have not changed, but the token saw additional liquidity inflows.
The Internet Computer chain only locks in around $23M in liquidity, with limited usage in app creation. At one point, Internet Computer had claims on challenging Solana and becoming the go-to chain for apps, but never managed to create the same community.
$ICP climb got a boost from a short squeeze
Most of the additional open interest for $ICP is on Binance, the token’s main trading venue. Unlike other tokens, in the case of $ICP, only around 30% of positions are short. In the past day, around $5M in short positions were liquidated, leaving traders to rebuild.
$ICP rose on a mix of general AI hype and a short squeeze. After a long slide in the past months, $ICP was attracting short traders. Since the end of October, it has become harder to hold short positions, as $ICP saw consistent negative funding. The negative funding trend continued during the latest price rally, further challenging the holders of short positions.
As of November 7, $ICP already burned through most of the short liquidity. Despite this, the rally is expected to continue, copying the model of ZEC. Potentially, $ICP is seen as reaching $20 in the case of an ongoing short squeeze and more active trading.