ICP hits three-month high as AI narrative fuels fresh demand

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.

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