Optimism (OP), the native token of the Ethereum scaling network, experienced a price slide on Monday as it prepared for an increase in its circulating supply. The token is scheduled to unlock 24.16 million OP tokens, which account for 3% of its circulating supply, this Saturday. This release is worth approximately $30 million, with $16 million allocated to core contributors and $14 million earmarked for investors.
Unlocking events like this are common among cryptocurrency projects to prevent early investors and insiders from immediately selling large quantities of tokens. While these events are typically considered bearish and often induce price drops, some investors may choose to front-run and sell before the unlocking occurs.
CoinDesk Indices data revealed that OP witnessed a 3.6% drop in the past 24 hours, significantly underperforming the mostly range-bound crypto markets. In comparison, the CoinDesk Market Index (CMI) only fell by 0.5% during the same period, while the CoinDesk Smart Contract Platform Index (SMT), to which OP belongs, remained relatively flat.
Over the course of a week, the token has lost about 10% of its value, making it the worst performer among the top 50 digital assets. Matrixport, a crypto services provider, recently published a report forecasting that alternative cryptocurrencies (altcoins) would struggle against the dominant crypto asset bitcoin (BTC) for the remainder of the year, partially due to token unlocks weighing on the market.
In conclusion, the upcoming unlocking event for Optimism’s native token has contributed to a decline in its price. While such events are typically considered bearish, they also provide an opportunity for investors to front-run and sell prior to the unlocking. The current performance of OP highlights its underperformance compared to other cryptocurrencies, potentially influenced by the broader market’s outlook on altcoins.