Optimism developers plan to unlock 386 million OP tokens with a value of over $587 million. This token unlock event will occur on May 31, 2023, marking the end of the initial vesting period.
The event will increase the circulating supply of OP tokens by over 100%. Analysts opine that the upcoming unlock event might affect OP’s price negatively.
OP Price Might Dip As Early Investors Cash In
Token unlocks in the crypto market are scheduled events that release early investors’ locked tokens after freezing them for a specific period.
Crypto communities use token locks to avoid large asset sales in low liquidity periods. Selling during these periods could have an impact on the price of the token.
But these events increase the number of tokens in circulation, creating an imbalance between demand and supply.
Regarding OP’s upcoming event, a research firm, Unlock Calendar, believes there is a probability that the Optimism Unlock event could create significant sell pressure for OP tokens.
This is because the early investors whose tokens were frozen have earned some returns on their investment and might decide to cash in their profit.
According to data from CryptoRank, early investors in Optimism at the seed round, Paradigm, and IDEO, realized over 10,000% of their original investment. Andreessen Horowitz (a16z) is another investor with major holdings in the project acquired at the seed round.
Notably, Optimism previously held two airdrop events to distribute OP tokens. The first airdrop occurred on June 1, 2022, with OP tokens distributed among nearly 250,000 wallet addresses belonging to early members of the ecosystem.
The next airdrop occurred on February 9, 2023, with over 11 million tokens distributed among 307,000 unique wallet addresses. These airdrop events led to increased trading activity at the time of distribution.
Optimism Plans to Improve Efficiency With Upcoming Bedrock Upgrade
The Optimism Bedrock upgrade is slated for June 6, 2023, and promises much-needed improvements in the ecosystem.
Optimism is a Layer 2 (L2) scaling solution built on Ethereum’s network, thus similar to this blockchain, but with much better performance and scalability.
However, the bedrock upgrade promises lower transaction fees, better network security, and increased compatibility with Ethereum.
Optimism’s team informed the public on May 15 that the network would experience downtime between two to four hours during the upgrade.
During this time, deposits, withdrawals, and other transactions will be unavailable. The upgrade will reduce transaction time from ten minutes to three minutes to confirm deposits.
Meanwhile, OP price is $1.52 at press time, down by over 6% within 24 hours. But OP’s trading volume is up by 43.12%, reflecting increased trading activities for the token today.
Hopefully, the upcoming Optimism Upgrade might affect its price performance when it concludes, but it largely depends on traders’ sentiments.
Featured image from Pixabay and chart from Tradingview.com