When the Internet Computer publicly launched on May 10, 2021, the price of its ICP governance token surged to $731. However, once the initial hype died down, ICP price settled into a $22 to $70 range with a few dips and spikes. Meanwhile, the Internet Computer network and ecosystem continued to enjoy rapid expansion. The economical and eco-friendly production of NFTs also burst onto the scene as an amazing unanticipated use case - certainly the first of many.
Why then has ICP price remained stagnant?
Many investors and speculators are understandably befuddled that ICP price does not yet reflect the Internet Computer's impressive adoption rate and expanding utility. Admittedly, most cryptocurrencies' prices have stagnated over the past six months, and many have declined. That being said, in view of exciting and upcoming initiatives like the Internet Computer's imminent integration of smart contracts with Bitcoin, one could hope that ICP price would buck market trends.
But is this hope well-founded?
A Hard Lesson in Human Behavior
To predict the price trajectory for ICP, first, it's necessary to understand the Internet Computer's history and how users are interacting with its tokenized open governance apparatus, the network nervous system (NNS). To do this, I've relied heavily on Kyle Langham's observations, whose substack is worth reading in its entirety if you have time.
In brief, ICP price has stagnated because an unexpectedly high number of early investors chose to sell rather than stake their ICP rewards. In retrospect, it should have been evident that many people would prioritize short-term gain, but the Internet Computer's tokenomics model was built on the assumption that most investors would prefer to keep a large portion of their ICP staked from day one.
Instead, early investors are continuing to flood the market with vast amounts of ICP as soon as their ICP rewards become available, which has resulted in a surplus of supply in the context of a broader bear market for cryptocurrencies.
Dominic Williams, the chief scientist at the DFINITY Foundation, has acknowledged the Internet Computer's apparent tokenomics problem and once hinted that a possible solution was in the works. Unfortunately, no solution has been proposed at the time of writing. This is unsurprising because retrospective solutions are notoriously elusive.
It is difficult, if not impossible, to see how to correct a failed assumption about the behavior of early investors after the fact. One could simply burn a significant portion of the ICP supply, but this may set a bad precedent for a network that's advertised as self-regulating.
Instead, Kyle Langham makes an excellent case for looking forward instead of backward regarding ICP's tokenomics. After all, the public launch of a blockchain and the subsequent cashing out of early investors constitutes a one-time, unrepeatable event. Come 2024, it simply won't be relevant anymore. Considered over the long term, the Internet Computer's tokenomics should prove robust.
Price Forecast for ICP
Kyle Langham foresees three plausible scenarios for the next six months.
1. Demand for ICP remains constant.
2. Demand for ICP doubles.
3. Demand for ICP increases fivefold or more.
Given the continued entry of ICP into the marketplace from early investors, only the latter two scenarios would result in a stable or increasing ICP price for the first half of 2022. Langham believes that some combination of the first and the second scenario is most likely.
Eventually, of course, the demand for ICP from the Internet Computer's NFT revolution will outpace supply, but according to Langham, it's entirely possible that ICP price could fall below $17 early next year before returning to a $25 to $70 range.
Moreover, barring an explosion in enterprise software development, ICP supply probably won't experience a substantial squeeze until 2024. At that point, ICP's burn mechanism for powering canister cycles will start to overtake node and governance rewards. At that point, the sky's the limit!
ICP price will likely decrease further before it recovers and soars. Although the Internet Computer's tokenomics appear robust, they failed to account for how much early investors would prioritize short-term gain. On the bright side, a lower ICP price will allow easier access to staking and permit people with average incomes to exercise substantial influence over the Internet Computer's development.
This aligns well with the Internet Computer's goal to become the future decentralized Internet, which wealthy investors should not dominate. With prices low for now, a growing ecosystem, increased adoption, and de-fi and game-fi coming in 2022, it may be a great time to accumulate ICP to join the adventure and help shape the Internet Computer's future!
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