Optimism (OP), the Layer-2 network built on Ethereum, has been unable to live up to its name. Its native token, OP, launched in May 2022 and offered market participants a glimmer of hope, especially with the significant airdrop distribution to early adopters.
Today, OP is a shadow of itself, falling from a peak of 4.85 five months ago to a nine-month low of $1.27. But that’s not all.
Investor Exodus Hits Optimism
In crypto, market participants view a massive correction as an opportunity to buy at discount prices. However, according to IntoTheBlock, this is not the case for OP.
Data from the blockchain analytics platform reveals a staggering 694% seven-day increase in the large holders’ netflow to exchange netflow. This metric tracks the rate at which stakeholders who own a large amount of cryptocurrency send them to exchange.
When this figure decreases, it means these large investors do not plan to sell, thereby providing an avenue for price stability or increase. However, a spike in the netflow points to preparedness to sell.
Optimism Large Holders Netflow to Exchange Netflow Ratio. Source. IntoTheBlock
Since it is from large investors, it could put downward pressure on the price, which is the situation with OP. The growth in this metric points to decreasing confidence in the token’s short to long-term potential.
However, native cryptocurrency is not the only part of Optimism’s ecosystem experiencing difficulty. According to DeFiLlama, Optimism’s Total Value Locked (TVL) had nosedived to $565.08 million — a value it last reached in January 2023. This same metric was worth over $1 billion when OP price reached its all-time high.
TVL, or Total Value Locked, measures the total value of assets staked or locked in a protocol. A higher TVL suggests increased trust and liquidity in the protocols under a chain. When TVL decreases, the network’s health is at risk as participants lose trust in the chain’s ability to generate good yields.
Optimism Total Value Locked. Source: DeFiLlama
Therefore, Optimism’s decline in this aspect indicates low investor interest, even though it signals a relatively undervalued protocol.
OP Price Prediction: Goodbye to $1 Soon?
OP’s setup on the daily chart shows it went through a long downtrend period between May and early July. This decline resulted in a falling channel where the token lost hold on key support and resistance zones.
The aftermath of that was a 51% jump to $1.99 in July. However, at press time, the token has lost all of those gains. In addition, the Chaikin Money Flow (CMF), which measures accumulation and distribution, has dropped to the negative region.
A positive CMF reading indicates that accumulation outweighs distribution. The decline on the OP/USD chart suggests increased distribution. If the trend continues, OP’s price risks dropping to $1.06.
Optimism Daily Analysis. Source: TradingView
This prediction will be invalidated if accumulation increases significantly. Additionally, the token may rebound if ETH’s price jumps due to the correlation between the two. In that case, OP’s price could revisit $1.52 or $1.81.