Internet Computer was one of the best performers in the cryptocurrency market on Thursday, supported by a newly released proposal to combat inflation. At the same time, exchange balances for the token have dropped significantly.

According to data from crypto.news, Internet Computer (ICP) rallied 34% to an intraday high of $4.78 on Thursday, morning Asian time, before stabilizing near $4.66 when writing. Its gains extended its weekly profits to 45% and nearly 79% since the beginning of this year.

Besides the initial push from a broader market rebound supported by Bitcoin’s recovery above key levels, the main catalyst driving Internet Computer price was a newly published whitepaper by the DFINITY Foundation, the nonprofit organization overseeing the network’s development.

Dubbed Mission 70, the paper proposes a set of updates to reduce inflation by at least 70% by year-end. This will be done through supply-side reforms that will provide 44% of the reduction from changes, which include slashing voting and node rewards.

The remaining 26% will be targeted by increasing network activity, which will be achieved through AI-powered on-chain cloud engines and autonomous agents.

As inflation declines, Internet Computer is expected to gain renewed investor confidence and broader utility adoption, potentially paving the way for a sustained price recovery over the coming months.

Simultaneously, data from Nansen shows that a supply shock is already brewing. The total balance of ICP tokens held across all exchanges has dropped 63% over the past 24 hours.

Such massive outflows indicate that whales as well as retail investors are likely moving tokens off exchanges to self-custody wallets or long-term staking neurons, which in turn is creating reduced short-term selling pressure for the token.

Internet Computer price analysis

On the weekly chart, Internet Computer price has been forming a massive bullish flag pattern. It usually leads to a continuation of a bullish trend after a brief period of consolidation amid profit-taking.

When such a pattern has been confirmed, it has historically been followed with an explosive surge that mirrors the length of the initial flagpole.

For now, the next key target that traders should keep an eye on is at $7.5. The level appears to act as a major resistance from where a breakout from the pattern could likely be confirmed. 

A decisive breakout above this target could propel ICP much higher to $10 or even higher if bulls remain dominant.

Momentum indicators showed bulls remained at an advantage, with the Supertrend flashing green and the MACD lines forming a bullish crossover.