Yes if your short duration power is very good Intervals.icu will overestimate your FTP. You can set the minimum duration that it will use in /settings. Maybe you should go with 7 or 8 minutes.
How it works, short version: It is essentially a generalisation of the 95% of 20m power rule of thumb to any duration from 3 minutes to about 30 minutes. So you just have to do one max effort of any reasonable duration to get an eFTP number.
Long version: Intervals.icu looks for points on your power duration curve of at least 180s (configurable) that indicate that you should be on a higher curve that then one for your current eFTP. If an effort puts you on a higher curve then your eFTP (from the power model parameters for that curve) goes up. If it does not then it wasn’t a max effort and is ignored i.e. your eFTP is left alone. Your eFTP will decay slowly if you reduce your training load and then you need to go do a max effort to get a new number.