More than 386 million Optimism (OP) tokens, worth $587 million at current prices, are scheduled to be unlocked on May 31 as the initial vesting period for early contributors and investors come to an end. This has prompted concerns of downward price pressure, since the large unlocking event could potentially see the circulating supply increase by more than 100%.
There is a reasonable chance that the Optimism unlock could create significant sell pressure for the native OP token due to early-stage investors sitting on sizable returns. The largest seed investors in Optimism include crypto venture capital firms Paradigm, Andreessen Horowitz (a16z), and IDEO CoLab Ventures. Data from CryptoRank reveal that investors in the seed round – Paradigm and IDEO – are currently up more than 10,000% on their initial investment.
However, it appears that the average buy-in price for the venture capital firms sits at approximately $0.24. This means that, at current values, the firms are sitting on an aggregate gain of 529%. Token unlocks are scheduled events where tokens allocated to early-stage investors and major development contributors are released after being locked up for a designated period of time. Crypto projects typically lock up tokens to avoid large asset sales during periods of low liquidity, which could have a significant impact on price.
Optimism is a layer-2 scaling solution that aims to make transactions and activity on the Ethereum network faster, cheaper, and more efficient. The OP token is the governance token of the Optimism network. While airdrops caused brief spikes of trading activity, the price of the OP token has been on a general downward trend in recent months. It has also taken a significant short-term hit ahead of the unlocking event, currently trading for $1.51 apiece, down 8.5% in the last 24 hours.
According to data from CoinGecko, OP is down 53% from its all-time high of $3.54, which it reached on Feb. 24 earlier this year. Market watchers and crypto enthusiasts will be keen to see if the unlocking of $587 million worth of OP tokens on May 31 will lead to further declines or if the market is able to absorb the sudden influx of new tokens.
Source: Cointelegraph
