The law of supply and demand makes it clear that increasing supply in relation to demand will likely cause prices to fall. This should come as no surprise when considering the recent unlocking of tokens, approximately 114% of Optimism‘s previous circulating supply of its OP token, which correlated with a near 50% decline in the token’s value over the past weeks.
Although the market may seem negative, several developments building on the OP stack indicate a more optimistic outlook for the ambitious Ethereum layer-2 solution. The “giant unlock” of supply led to Optimism’s OP token dropping roughly 17% over a few days, as mentioned by a Blockworks research analyst on the 0xResearch podcast. Tokens will continue to unlock half a percent of the total supply each month until around 2027.
Many wonder if upcoming events, like the impending Bedrock upgrade that allows Ethereum to eventually become a “Superchain,” will be enough to maintain a positive sentiment. Or, will the overhangs over time also be too much since liquidity is quite low at the moment?
The Bedrock upgrade allows chains to build on the OP stack and create a single unified network featuring “bridging, governance, upgrades, and cross-chain communication.” The mainnet upgrade is scheduled for June 6th. Projects like Worldcoin and Coinbase‘s Base testnet, which will build on the OP stack, appear well-timed to sustain a positive atmosphere despite the planned token releases.
Worldcoin aims to verify “humanness” via a decentralized, open-source, and privacy-preserving protocol developed by co-founder Alex Blania. Coinbase, America’s largest cryptocurrency exchange, is building the layer-2 chain, Base, on Optimism to provide a secure, low-cost, and developer-friendly platform for building decentralized apps or “dapps” onchain.
Historically, teams have often deliberately timed protocol upgrades to coincide with token unlocks in order to mitigate suppressive effects on the market. In crypto, these massive unlocks imply that everyone can dump early, but this is mostly due to market inefficiency and overpricing.
Some believe that as projects grow in attachment to Optimism, conditions may evolve to resemble the Cosmos ecosystem where “the hub isn’t necessarily the central value accrual token.” Token value could pivot on whether the OP stack chain returns sequencer revenue to public goods funding, which would create an enticing flywheel if it becomes the standard.
Source: Blockworks
