Optimism [OP]: Social hype reaches new heights: Is a cool-off looming?
- Following Base’s launch, Optimism saw a jump in its price and social dominance.
- The hike in social mentions might precipitate a decline in the alt’s value.
The hype surrounding the testnet launch of Coinbase’s [BASE] new Ethereum [ETH] layer-2 network has led to increased discussions about Optimism [OP].
How much are 1,10,100 OPs worth today?
This jump in discussions pushed OP’s social dominance to register a six-month high of 1.67% on 24 February. Likewise, on the same day, OP’s price peaked at $3.06%. The decline in OP’s price and social dominance that immediately ensued has led many to believe that the $3.06 price level marked a local top, which might be followed by a price reversal.
Excessive social media mentions, particularly during a price surge, can indicate peak hype and irrational confidence in a coin’s market performance. Such spikes in social activity frequently signify local price tops and subsequent periods of cooling off.
What do other on-chain metrics tell us?
OP holders, brace for impact
Several on-chain indicators have proven effective in identifying local market tops, and Age Consumed is high on the list. This indicator tracks the activity of previously inactive coins on a network, and spikes in its value suggest that a significant number of idle tokens are changing addresses, indicating a sudden shift in behavior among long-term holders.
HODLers and experienced traders make strategic decisions rather than impulsive ones, making renewed activity of dormant coins a reliable indicator of major shifts in market conditions.
According to data from Santiment, on 24 February, as OP’s price rallied, the value of its Age Consumed metric spiked as well. This showed that previously dormant OP tokens changed hands as HODlers capitalized on the price rally to log profits.
The price decline that followed showed that the preceding spike in Age Consumed earmarked the 24 February price top.
Realistic or not, here’s OP’s market cap in BTC’s terms
Another key metric to consider is the Network Profit/Loss ratio (NPL). As OP’s grew on 24 February, its NPL also rallied to a three-month high. It can be inferred from this that traders who bought into OP’s position during its price increase quickly closed their positions to reap profits. As traders exited the market, expectedly, this was followed by a decline in the alt’s value.
Lastly, a look at OP’s Open Interest confirmed the drop in open trade positions since 24 February. It has since dropped by 51%, according to data from Coinglass.