- Unlocking 3.6% Optimism tokens may increase selling pressure and impact OP’s growth.
- Optimism protocol faces challenges with declining token price, user retention, and interest in NFTs.
In the realm of Layer 2 (L2) solutions, the Optimism [OP] protocol has gained recognition and shown promising performance in recent months. However, the recent token unlock event may pose challenges for OP’s future growth trajectory.
Will OP unlock its potential?
According to tokenunlocks, on 31 May, a substantial 3.6% of Optimism tokens worth $258 million will become unlocked. This influx of tokens into the market could potentially increase the supply of OP tokens for trading, leading to heightened selling pressure and potential downward price movements.
At the time of writing, OP was trading at $1.635, reflecting a decline of 41.99% since April 15. The token was hovering near the point of control line (red), while the On-Balance Volume (OBV) indicator had experienced significant declines in recent days. Additionally, the Chaikin Money Flow (CMF) for OP also dipped to -0.17 within the same period.
These indicators suggested a bearish sentiment in the OP market. The declining price, coupled with lower OBV and negative CMF, indicated an increased selling activity and reduced buying interest.
Source: Trading View
Over the past three months, the velocity of OP tokens, which measures the frequency of trading, has declined. This indicates a reduced level of trading activity for OP. Additionally, the overall network growth of OP has also witnessed a slowdown, suggesting a lack of interest from new addresses in the OP token.
Source: Santiment
The protocol shows promise
Despite these setbacks, the Optimism protocol itself has demonstrated relative success. According to Dune Analytics, Optimism has surpassed Arbitrum [ARB] in terms of revenue generation.
Read Optimism’s [OP] Price Prediction 2023-2024
However, user retention on the Optimism protocol experienced a significant decline. This can be attributed, in part, to the waning interest in Optimism NFTs. To revitalize interest in the NFT sector, Optimism has undertaken initiatives such as hosting art contests to reignite enthusiasm among users.
Source: Dune Analytics
It remains to be seen how Optimism regenerates interest in its protocol and its token going forward.
