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Optimism (OP) the price could drop below $2 after the DeFi Hack

Optimism (OP) is down 25% as the bearish trend enters its third consecutive week. A deeper analysis of the on-chain fundamental data points to tough times ahead for OP holders.

Optimsims (OP) is one of the largest scaling solutions on Ethereum, with a market capitalization of over $900 million at its peak. On April 14, things took a downward turn when Hundred Finance DeFi lending protocols built on the Optimism Network were hacked for $7 million.

Large institutional investors holding OP native coins seem to have become dovish, exiting their bullish positions as they move into alternative DeFi protocols that carry yield.

Optimistic investors fear the impact of contagion

Since the Hundred Finance hack on April 14, significant transaction volumes on the Optimism host network have plummeted. Specifically, the number of transactions over $100,000 decreased by 73%, from 48 to 19 per day on April 15 and May 2.

Optimism (OP) price versus number of whale transactions. May 2023. Source: Emotion

This suggests that institutional investors are becoming increasingly wary of a potential contagion effect spreading through the optimist’s web.

Unless this sharp decline in whale trading activity is mitigated, OP holders could drop in prices further in the coming days.

The whales entered a quick selling frenzy

Moreover, the on-chain data shows that optimism whales have gradually reduced their OP holdings. This adds credibility to the bearish price forecast.

The chart below shows how cryptocurrency whales with 1m to 100m OP started selling as soon as the hack event hit the news. Since the news broke on April 15th, whales have now sold 12 million coins as of May 3rd.

Optimism (OP) price versus whale portfolio balances.  May 2023
Optimism (OP) price versus whale portfolio balances. May 2023. Source: Emotion

At a current market value of $2.10, the value of 12 million coins sold is $25 million. For context, that’s roughly 4% of Optimism’s current market cap.

When whales start dumping large amounts of currency over a short period, it can send the price of the underlying currency into a downward spiral.

Unless the optimism network can reignite the interest and confidence of whale investors, the downtrend may continue.

OP Price Prediction: Possible drop to $1.65

IntoTheBlock’s global In/Out of the Money (GIOM) price data shows OP will drop towards $1.65. But the bears will have to fight the initial support line around $2. Around this price level, the 7,000 investors who bought 8 million coins will try to block the decline.

But if the market remains bearish as expected, the price optimism could drop towards $1.65, where there is more support from 51 investors holding 797 million OP coins.

Optimism (OP) GIOM price distribution data.  May 2023
Optimism (OP) GIOM price distribution data. May 2023, source: IntoTheBlock

However, the bulls can invalidate the bearish position if the OP price can break above $2.26. But fierce resistance from 58,000 titles holding 38 million coins can be a challenge.

Although unlikely, if the bulls can extend the selling range at $2.26, bulls can be optimistic of an early rebound towards the $2.65 region.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

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