NEW DELHI (CoinChapter.com) — Optimism’s in-house token, OP, saw its price balloon by nearly 177% in the new year to form a new all-time high of $2.55 on Jan 25. Optimism’s rally in the new year was likely due to the rumors of another airdrop event circulated in the market.
The Optimism Quests, an event comprised of various tasks that aim to educate a user on how to use Optimism and other projects in its ecosystem, sparked speculations of an upcoming OP airdrop.
Users received commemorative badges for completing quests. Participants likely misunderstood that completing the quests was an eligibility requirement for the airdrop event. As a result, the number of transactions and active addresses on Optimism spiked during early Jan.
However, user activity on Optimism plummeted after reaching a peak of 734,402 transactions per day on Jan 13. The number of active addresses reached an ATH of 111,229 on Jan 21 before plunging almost immediately.
OP Rally Likely Unsustainable
The drop in on-chain numbers suggests the ongoing OP price rally might be unsustainable since it was mostly fueled by hype and FOMO. Furthermore, several traders have expressed bearish sentiment for OP price action in the long term.
Pseudonymous crypto trader George informed his nearly 93,000 followers that he closed down his long positions on OP. Furthermore, Thor Hartvigsen, a blockchain researcher, noted that the Optimism token’s inflation acts as a bearish cue for OP price action.
Also Read: dYdX Price Doubled YTD — But Major Selloff Troubles Ahead
Hartvigsen reminded crypto Twitter that only 214 million of the roughly 4.3 billion OP tokens are currently in circulation. Future token unlock events would increase the Optimism token’s liquidity. An increased token supply often acts as a bearish cue for its price action.
Additionally, the network emits nearly 1.1% of the Optimism token’s market cap daily.
Momentum Oscillator Bearish For OP Price Action
After forming a new ATH on Jan 25, the Optimism token price dropped 15% to form a daily low near $2.14 on Jan 26. The long wicks on OP price’s recent daily candles underscore the bearish pressure against the Optimism token.
Moreover, the momentum oscillator MACD continued to be bearish for the Optimism token. Positive bars on the MACD histogram are contracting, indicating the MACD line (difference between 12-day and 26-day EMA) moves toward the MACD signal line (9-day EMA of MACD), likely to form a bearish crossover.
Traders might start selling once the MACD lines form the bearish pattern, forcing OP price to drop to support near $2.11. Furthermore, a lack of faith in OP price action might result in the Optimism token dropping below immediate support to test the 20-day EMA (red wave) support near $1.8.
Conversely, if OP price continues to rise, the L2 token might rise above immediate support near $2.4. A break and hold above immediate support could help OP price rise above its recent ATH to challenge resistance near $2.84 before correcting.
