ICP's Breakdown Below $3.40: A Technical Catalyst for Deeper Correction or a Buying Opportunity?

The recent breakdown of the Internet Computer (ICP) below the $3.40 support level in late December 2025 has ignited intense debate among traders and analysts. This critical threshold, which had historically served as a robust floor for the asset, now acts as a psychological and technical catalyst. To assess whether this move signals a deeper correction or a potential buying opportunity, we must dissect the interplay of technical dynamics and options market sentiment.

Technical Analysis: A Fractured Support and Bearish Momentum

The $3.40 level, once a cornerstone of ICP's short-term structure, collapsed on December 11, 2025, as the price plummeted to $3.33–$3.35. This breakdown followed a failed attempt to hold above $3.55 earlier in the month, with the RSI hovering at 35.64-a mild oversold reading that failed to trigger a meaningful rebound. Meanwhile, the MACD remained bearish, underscoring the lack of bullish conviction.

The immediate aftermath saw ICP stabilize near $3.33–$3.35, but this zone lacks the historical resilience of the $3.36–$3.40 support, which had previously held firm during volatility. A retest of the $3.30 level now looms as the next critical test, with failure to rebound from this zone likely extending the decline toward $3.05–$3.08. Conversely, a sustained recovery above $3.55 could reignite bullish momentum, with $3.60–$3.65 acting as key resistance.

Options Market Insights: Sentiment Shifts and Risk Reversals

The breakdown below $3.40 coincided with a 7.3% price drop, triggering elevated volatility and a surge in risk-reversal activity. Traders increasingly adopted strategies involving selling out-of-the-money puts and buying OTM calls-a hedge against further downside while retaining upside potential. This approach reflects a cautious yet opportunistic stance, as the put/call ratio showed mixed signals. While call volume spiked on December 8 (as ICP briefly tested $3.44), bearish sentiment dominated by December 10, with open interest data remaining inconclusive.

Historically, ICP has demonstrated resilience at $3.36–$3.40, but the recent breakdown suggests a shift in sentiment. The 2025 price prediction article noted a conservative range of $3.05–$3.36 for the year, aligning with the current trajectory. This implies that while the $3.30 level is a critical inflection point, the asset may still find a floor within its projected bounds.

Risk-Reversal Strategy: Balancing Bearish and Bullish Bets

For investors, the breakdown below $3.40 presents a strategic crossroads. A risk-reversal approach-selling OTM puts to collect premium while buying OTM calls-could mitigate downside risk while capitalizing on a potential rebound. This strategy gains traction if ICP stabilizes near $3.30, as a rebound from this level could trigger a retest of $3.55, offering a high-probability entry for long positions.

However, the bearish bias remains intact unless ICP regains the $3.40 zone and sustains a move above $3.55. The MACD's bearish divergence and the lack of volume-driven breakouts (despite a 31% spike on December 8) suggest that conviction on the buy side is fragile.

Conclusion: A Tenuous Equilibrium

ICP's breakdown below $3.40 underscores a fragile equilibrium between bearish exhaustion and potential buying opportunities. While technical indicators and options sentiment lean toward further correction, the asset's historical resilience at key levels-particularly $3.36–$3.40-offers a glimmer of hope for bulls. Investors should monitor the $3.30 support and $3.55 resistance with equal vigilance, as these levels will determine whether the breakdown is a catalyst for deeper selling or a setup for a reversal. In this volatile environment, a risk-reversal strategy may prove optimal, allowing traders to hedge against uncertainty while positioning for a potential rebound.