The Optimism token is experiencing a significant downturn as the recent upsurge in cryptocurrency prices comes to a halt.
On October 10, Optimism (OP), a prominent layer-2 token, was trading at $1.5140, marking a 70% decrease from its peak this year.
One contributing factor to Optimism’s decline in 2023 is its loss of market share. It has been surpassed by layer-1 networks such as Avalanche and Sui in crucial sectors like decentralized finance, as well as by popular layer-2 networks Base and Arbitrum.
The total value locked in Optimism’s DeFi sector has plummeted to $627 million, a notable drop from its year-to-date high of $1.04 billion. Additionally, stablecoin volumes within its ecosystem have decreased from a peak of $1.35 billion to $1.17 billion.
Moreover, Optimism’s involvement in the decentralized exchange (DEX) index market is dwindling, with weekly volumes falling by 24% to $503 million, while competitors Sui and Base have seen volume increases of 51% and 5%, respectively.
The OP token’s price fell following the announcement of its fifth airdrop, which released 10 million OP tokens to over 54,000 addresses, leaving 500 million tokens set aside for future airdrops, raising concerns about potential dilution for existing holders.
This dilution is part of a larger picture, as Optimism has a circulating supply of 1.25 billion tokens out of a maximum supply of 4.29 billion. Recent data indicates that the network unlocked 49.19 million tokens in September, with the final unlock anticipated for 2026.
Additionally, Optimism’s futures market activity has also seen a downturn, with open interest diminishing to $104 million on October 10, down significantly from a year-to-date peak of $327 million.
Optimism Token Faces Potential Further Decline
Technical analysis of the OP token indicates a strong downtrend since reaching a high of $4.86 in March. The token is trading below both the 50-day and 100-day Exponential Moving Averages, while the Relative Strength Index (RSI) shows a downward trend.
Furthermore, a bearish flag pattern has formed, indicating the possibility of a bearish breakout. Should this scenario unfold, the token may revisit its support level at $1.06, which was its lowest point in August.
