YEREVAN (CoinChapter.com) – Internet Computer token, ICP, lost 20% in a week and slid to $6.0 on Feb 28, after paring its early February gains. Notably, despite the 81% advance year-to-date, ICP traded 98% lower than its all-time high established in June 2022.
Will the ICP Token Hold Crucial Support?
The daily chart below shows that the ICP token approached a key support/resistance line at $5.8. If ICP retests the said line, another potential resistance for the token will stand at $6.3. However, dropping trading volumes testify to the traders’ unwillingness to bet on the altcoin.
Moreover, ICP price action moved below its 20-day exponential moving average (EMA-20; red wave), adding to the bearish prognosis. If ICP slides below the said support line, the short-term target will be $5.4 and possibly $5.1.
As underscored by two ‘golden crosses’ on the chart above, ICP is bullish. In detail, a golden cross occurs any time a short-term MA crosses above a long-term MA. For example, the ICP daily chart printed a crossover between the EMA-20 and EMA-50 (orange wave) on Jan 13 and another crossover between the EMA-50 and -100 (light blue wave) on Feb 1.
Also read: Optimism Token OP Jumps 15% in a Day amid $900M Capital Inflow.
Meanwhile, Internet Computer is not the only layer 1 to suffer heavy losses in 2022, as many others lost momentum despite token price advances year-to-date.
Layer 1 blockchains under pressure – TVL drops
According to DeFi analytical platform DeFiLlama, the overall total value locked (TVL) in the DeFi sector grew from $39 billion on Jan 1 to $48 billion on Feb 28. However, a closer look at the different chains reveals an alarming trend for layer one investors.
The only three chains with a positive month among the top 10 DeFi platforms were Ethereum and two of its layer-2 solutions: Arbitrum and Optimism. Meanwhile, several Layer 1s, including Solana, Avalanche, and Polygon, lost altitude.
Vance Spencer, the co-founder of Framework Ventures, also assessed the situation as pessimistic for layer 1s. He mentioned ICP, among other platforms, as “unsustainable,” given that the project’s token is trading at a 37,000x multiple to earnings.
I think we break the collective hallucination that L1s are valuable because of the reasons for this cycle. ICP is trading at a 37,210x multiple to earnings. ATOM is at 231,000x, Aptos is infinity, and DOT same. Not sustainable. At some point, trash goes to 0 under the weight of VC unlocks.
said the expert.
Also read: SOL Price Prediction: Key Reasons Why Solana Could Retest $20.
While the fate of other layer 1s remains questionable, given the shaky market conditions, ICP will likely see short-term declines in tune with the Bitcoin price action. However, making long-term prognoses amid the bear market does not seem reasonable.
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