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Optimism Price Falls Below Long-Term Resistance, Price Trends Unaltered by OP Token Unlock

Last Updated April 29, 2024 8:26 AM
Valdrin Tahiri
Last Updated April 29, 2024 8:26 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • On April 29, 24.6 million OP tokens will unlock, part of a linear vesting schedule.
  • OP has decreased since its all-time high, falling below a long-term horizontal resistance area.
  • Is there a relationship between previous token unlocks and the OP price movement?

The price of Optimism has increased considerably since its bottom on April 13. While the 50% price rise is admirable, OP is still below 40% its all-time high, reached in March. Additionally, the weekly close above a long-term area which was expected to provide support put the entire bullish trend at risk.

There is an upcoming token unlock on April 29. Can it help the OP price reclaim the $2.90 area, will it cause a rejection, or will it have no effect at all?

Optimism Unlock Characteristics

On April 29, 24.16 million OP tokens will be unlocked. The unlock is part of a linear vesting schedule  with monthly releases that started in May 2023. It will continue until May 31, 2027. The unlock will be nearly equally divided between core contributors and investors. Optimism has a circulating supply of $1.05 billion  and maximum supply of 4.3 billion.

So far, 21% of the total supply is unlocked, 21% is locked but will be released based on this linear vesting schedule, while the release schedule for the other 56% is not determined yet.

Optimism Vesting Schedule
OP Vesting Schedule | Credit: DeFiLlama

An interesting part of Optimism’s tokenomics is that 256.245 million tokens are allocated for future airdrops. According to the foundation,  the primary objective of these airdrops is to allocate them to addresses that contribute positively to the Optimism community.

Given the potential for exploitation in airdrop systems, the Optimism Foundation establishes the criteria for their distribution. So far, there have been 4 airdrop campaigns, given to various contributors of the Optimism ecosystem.

Optimism Circulating Supply Forecast
OP Supply Forecasts | Credit: Optimism Foundation

Additionally, the foundation forecasts  that 77% of the total supply will be circulating in April 2027.

Compared to now, the biggest amount of tokens will go the Retroactive Public Goods Fund , which is Optimism’s primary mechanism to reward public goods for the impact they provide. While the fund currently boasts only 40 million tokens, this will grow to 140 million in 2027.

When combined with the airdrops, it seems that the Optimism foundation prioritizes its contributors based on its upcoming token allocation.

Do These Unlocks Cause a Price Movement?

Discounting the one today, there have been 10 unlocks of 24 million OP tokens so far. They have had different effects on the price. More specifically, the price has increased seven times (green), while fallen three (red).

Increases have varied between 0.2 and 9%, while decreases from 0.1 to 3%. So, there does not seem to be a decisive correlation between the token unlocks and price movement.

Optimism Unlocks Price Movement
OP/USDT Daily Chart | Credit: TradingView

While there have been more increases than decreases, the number is not high enough to confirm the token unlocks and price increases. Also, the magnitude of price movement has been unpredictable, further aiding to the confusion.

Finally, expectations of a price decrease stem from the anticipated dilution in supply, so the increases contradict this widely accepted notion.

OP Price Falls Below Long-Term Support

The weekly time frame chart shows that OP has fallen since its all-time high in $4.86. The decrease has been sharp, causing a weekly fall and close below the $1.90 horizontal area.

This is a critical area since it initially acted as the all-time high resistance until the price finally broke out in November 2023 (green circle). Then, it turned to support (green icon), leading to the all-time high.

Optimism Price Breaks Down Below Support
OP/USD Weekly Chart | Credit: TradingView

However, OP nosedived below the support in the beginning of April, creating a large bearish candlestick. Despite the ensuing bounce, the price has not reclaimed the $2.90 area yet. Whether it validates it as resistance or reclaims it can be key in determining the future trend.

The weekly RSI and MACD are both bearish. They are trending downward; the RSI fell below 50 and the MACD made a bearish cross.

OP Price Prediction: Can the Price Reclaim Its Lost Support?

Unlike the weekly time frame, the daily one shows a more bullish outlook for several reasons. OP broke out from a 52-day descending resistance trend line on April 27, the MACD made a bullish cross (green icon), and the RSI is moving above 50 (green circle). There has also been positive Optimism news last week, since CELO decided to use its stack for its upcoming migration to Ethereum.

In the daily time frame, the main resistance area is at $3.33. The 0.5 Fibonacci retracement support level and a horizontal resistance create this area, which is above the long-term horizontal resistance from the weekly time frame.

OP Price Breaks Out
OP/USD Daily Chart | Credit: TradingView

So, if the OP price closes above this level in the daily time frame, it will likely reclaim the long-term horizontal resistance. In this case, traders can consider the long-term trend bullish. However, if it faces rejection, the long-term trend will be deemed bearish.

Reaction to the $2.90 Area Will be Critical

The mixed readings from the weekly and daily time frames have left the future OP trend undetermined. Also, the ambiguous reaction to previous token unlocks does not help in determining what the correct trend is. Instead, analysts can utilize whether OP closes above or below $2.90 in the weekly time frame as a benchmark to determine if the trend is bullish or bearish.

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