Internet Computer [ICP] rose 14% at press time, as the cryptocurrency market remains in a recovery phase and demand continues to build.
Several reasons supported the price growth, especially when considering the on-chain activities in the market. However, off-chain, there’s a different scenario quietly playing out, hinting that a market decline could be around the corner.
On-chain linked growth
One of the clearest signals that has influenced the price significantly has been the flow of capital into the stablecoin market.
DeFiLlama reported that during the past day, stablecoin liquidity surged significantly, with a gain of roughly 10% in the last seven days, bringing it towards $3.98 million as of writing.
The surge in stablecoins indicates that more capital is flowing into the chain, which ultimately increases utility for its native token, ICP.
At the same time, blockchain fees have grown, reaching a high of $9,210. While that remains broadly minimal in comparison to other chains, this remains one of the highest levels it has traded at in months.
Off-chain, traders are selling
On-chain growth matters as much, but what traders and investors are doing could have more effect on price, and right now, sellers are gradually stepping in.
The presence is confirmed through the Open Interest-Weighted Funding Rate, which measures capital in the perpetual market in relation to long or short positions.
In situations where longs are dominant, the Open Interest-Weighted Funding Rate remains positive, and when they aren’t, there’s a flip and the metric turns negative.
At the time of writing, the Open Interest-Weighted Funding Rate has flipped negative on the chart, with a reading of -0.0086% at the time of this writing.
This comes at a time when there has been a surge in capital inflow into the perpetual market, with CoinGlass reporting Open Interest surging 12% to roughly $103.46 million.
A surge in capital inflow at a time when short positions remain dominant could mean short traders are fueling their positions in the market, which could weigh on price notably.
Sellers’ volume remains a factor
There’s been growth in sellers’ volume in the market, with the Taker Buy/Sell Ratio, otherwise known as the Long/Short Ratio, plummeting to roughly 0.87 on the chart as of writing.
When the ratio is below 1, it suggests that there’s been growing selling pressure in the market. When there’s a further decline, as is the case here, it implies that investors may consider the asset overvalued and are placing bids for a decline.
For now, unless the Funding Rate turns positive and volume returns to support buyers, there’s a high chance that this could weigh on ICP’s performance, potentially forcing the asset lower.
Final Summary
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ICP has gained 14% as stablecoin liquidity and blockchain fees show signs of improving on-chain activity.
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A negative Funding Rate and a 0.87 Taker Buy/Sell Ratio point to rising selling pressure.
