Virtuals Protocol, trading under the ticker VIRTUAL, has recently captured attention by leading the AI agents' narrative within the cryptocurrency market. On January 2, VIRTUAL briefly eclipsed a market cap of $5 billion, with its price achieving an all-time high of over $5. Despite this surge, the rally was brief, as a 15.20% price drop occurred in the following 24 hours. Below, we delve into the reasons for this rapid decline and what the future may hold for VIRTUAL.
As of January 1, Virtuals Protocol's market cap stood at $3.87 billion. It surged to $5.05 billion yesterday, though it has since receded to $4.28 billion. Market capitalization is determined by the product of circulating supply and price. Given that VIRTUAL's total supply of 1 billion tokens is in circulation, any price fluctuations greatly impact the cryptocurrency's market cap.
A decrease from $5.05 to $4.28 within a day reflects in its market cap, suggesting potential vulnerability to further price declines.
According to BeInCrypto, the 15.20% decrease was due to significant profit-taking by holders. Santiment data shows that on January 1, on-chain profit volume reached 5.95 million.
By January 2, at VIRTUAL's price peak, the profit volume increased to 6.56 million. At this current price level, VIRTUAL investors realized profits exceeding $28 million. Continued profit-taking could precipitate a more sustained decline in market cap and price.
The recent price retracement of VIRTUAL was also driven by technical factors. The Relative Strength Index (RSI), a momentum indicator assessing whether an asset is overbought or oversold, indicated an overbought condition at 79.87 on January 2 for VIRTUAL/USD. Additionally, the Supertrend indicator flagged a resistance level at $5.15, suggesting potential for further decline to $3.85 if selling pressure persists.
Nevertheless, if the bulls succeed in pushing VIRTUAL past this resistance level, a reversal could occur. In such a bullish scenario, VIRTUAL's market cap might exceed $6 billion, with its price approaching $7.