Layer 1 (L1) Token IP rose by 4% in the past 24 hours, going against the broader cryptocurrency downturn and recording today's highest market gain, but warning signals are flashing beneath the surface despite the price surge.
According to BeInCrypto on the 22nd (local time), on-chain activity remains low, suggesting that the rally may not be supported by strong fundamentals.
While most cryptocurrencies showed a decline in trading over a day, IP went against the trend and recorded an increase. However, on-chain indicators signaling increasing skepticism among traders suggest that the rally may not last long.
For example, during the 4% rally over the past day, IP's daily trading volume decreased by 38%, indicating few participants supporting the price movement.
When the asset's price rises while trading volume decreases, it suggests fewer participants are driving the price movement. This indicates weak buying momentum or lack of broad market support behind the IP price rally.
These conditions make the coin's rally unsustainable and increase the risk of reversal or decline.
Moreover, IP's funding rate remains negative, reflecting that many futures market traders are taking short positions betting that the price will fall. At the time of writing, it stands at -0.14%.
The funding rate is a periodic fee paid between perpetual futures market traders to align contract prices with spot prices. A negative funding rate indicates that short traders are paying long traders, showing that the market majority is betting on price decline.
In IP's case, the negative funding rate suggests many traders anticipate a reversal of the recent price rally. This reflects the ongoing bearish pressure that has constrained the coin's performance in recent weeks.
At the time of writing, IP is trading at $2.75, remaining above the core support line of $1.59. If demand weakens, IP could sharply drop below this bottom line, potentially falling below the $1 mark.
However, a revival of new demand for altcoins could invalidate this bearish outlook. In that scenario, IP's price could rebound towards $3.17. A successful break above that resistance line could push the Token price to the $4.41 level.
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