On May 31st, the market will usher in a major event: more than 386 million Optimism (OP) tokens will be unlocked. This amount is more than three times the current circulating supply, with a total value of $587 million. The incident sparked concerns that prices could face downward pressure.
Background of token unlocking
Token unlocking is a scheduled procedure that aims to release tokens held by early investors and important development contributors after a fixed period. Generally speaking, cryptocurrency projects choose to lock their tokens to prevent large-scale sales of assets in the event of illiquidity and thus avoid a significant impact on the price.
Major investors and their returns
According to data from token unlock research firm Unlock Calendar, the unlocking of Optimism will likely lead to a surge in sales of native OP tokens, in large part due to the large gains held by early investors. Venture capital firms Paradigm, Andreessen Horowitz (a16z) and IDEO CoLab Ventures have been confirmed as Optimism’s major seed investors. According to the latest statistics from CryptoRank, Paradigm and IDEO’s initial return on investment in this seed round of financing has exceeded 10,000%. However, the average purchase price of these VCs is about $0.24, which works out to an overall return of 529% right now.
Optimism’s development and future plans
Optimism is a second-layer (L2) scaling solution that aims to speed up transactions and activity on the Ethereum network, reduce costs, and increase its efficiency. On June 1 last year, Optimism launched its first airdrop campaign, distributing OP tokens to nearly 250,000 addresses associated with early adopters of the network. Then on February 9, 2023, a second massive airdrop was held, distributing over 11 million OP tokens to 307,000 different addresses.
Major "Bedrock" update
The major "Bedrock" update will happen on June 6th in Optimism. These updates are expected to further improve the performance and efficiency of the network, providing users with a better experience.
Market reaction and price trends
Looking back at the price action of Optimism (OP) over the past 30 days, Source: CoinGecko. The airdrop activity did lead to a short-term increase in trading volume, but the overall price of OP tokens has still been declining over the past few months. It also experienced several major short-term declines before the lock-up event.
Currently, each OP token is selling for $1.51, down 8.5% from the previous day. According to data from CoinGecko, OP has fallen 53% from its all-time high of $3.54 since February 24 this year.
Risks and Opportunities
This large-scale unlocking event undoubtedly brought huge volatility risks to the market. Early investors may choose to sell their token holdings after they are unlocked, causing a surge in supply on the market and further depressing the price. However, this also provides an opportunity for new investors to get in, especially after the price corrects.
long term outlook
Although the market may be under pressure in the short term, in the long term, Optimism's prospects as a project dedicated to improving the performance of the Ethereum network are still worth looking forward to. As the "Bedrock" update progresses, Optimism's technical advantages will be further highlighted, bringing more value to the entire blockchain ecosystem.
Conclusion: Overall, the OP token unlocking event on May 31st is undoubtedly a major event in the market. Investors need to pay close attention to market trends and do a good job in risk management. At the same time, for those investors who are optimistic about the future development of blockchain technology and the Ethereum network, this is also an opportunity that cannot be ignored.