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- Over 386 million Optimism (OP) tokens, valued at $587 million, are due to be unlocked on May 31, potentially increasing the circulating supply by more than 100%.
- This substantial unlocking event could potentially cause significant selling pressure for the native OP token due to early investors holding substantial returns.
Impending Unlocking Event Stokes Concerns
On May 31, more than 386 million Optimism (OP) tokens, which equates to roughly $587 million in current market prices, are planned to be unlocked. This event, which will mark the conclusion of the initial vesting period for early contributors and investors, has sparked worries about a possible downward trend in the token’s price. This scheduled unlocking of OP tokens is one of the largest set for this year.
Considering the current total circulating supply of merely 335 million OP tokens, the unlock could lead to an increase in circulating supply by more than 100%.
Research firm Unlock Calendar’s analysis suggests that the Optimism unlock might result in significant sell pressure for the native OP token. This is primarily due to early-stage investors potentially realising considerable profits. The biggest seed investors in Optimism include crypto venture capital firms like Paradigm, Andreessen Horowitz (a16z), and IDEO CoLab Ventures.
Investment firms that participated in the seed round — Paradigm and IDEO — have seen their initial investment rise by more than 10,000%, as per CryptoRank’s data.
The Dynamics of Token Unlocks and Implications
Token unlocks are scheduled instances when tokens allocated to early-stage investors and key development contributors are “unlocked” after being frozen for a certain duration. Crypto projects usually ensure token lock-up to prevent massive asset sales during periods of low liquidity, which could significantly impact the token’s price.
Optimism is a layer-2 scaling solution designed to enhance the speed, affordability, and efficiency of transactions and activities on the Ethereum network. The OP token serves as the governance token of the Optimism network.
On June 1 of last year, Optimism initiated its first airdrop, distributing OP tokens to approximately 250,000 addresses associated with early network users. The second significant airdrop took place on Feb. 9, 2023, distributing over 11 million OP tokens to 307,000 unique addresses.
Price Implications of Token Unlock
The airdrops have led to brief spikes in trading activity, but the price of the OP token has been generally declining in recent months. The price has also suffered a considerable short-term hit ahead of the unlocking event and currently trades at $1.51, down 8.5% in the last 24 hours. OP is down 53% from its all-time high of $3.54, which it reached on Feb. 24 earlier this year, according to CoinGecko’s data.