Cryptocurrency

Optimism set to unlock $587M worth of OP tokens, will investors unload?

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 comes to an end, prompting concerns about downward price pressure.

The May 31 OP unlock is one of the largest scheduled unlocking events of this year. With a current total circulating supply of just 335 million OP tokens, the unlock could potentially see the circulating supply increase by more than 100%.

According to analysis from token unlock research firm Unlock Calendar, there’s a reasonable chance that the Optimism unlock could create some significant sell pressure for the native OP token, in large part due to early-stage investors sitting on sizable returns.

The largest seed investors in Optimism include the crypto venture capital firms Paradigm, Andreessen Horowitz (a16z) and IDEO CoLab Ventures. According to data from CryptoRank, investment firms that participated in the seed round — Paradigm and IDEO — are currently up more than 10,000% on their initial investment.

However, as a whole, it appears that the average buy-in price for the venture capital firms sits at approximately ​​$0.24, meaning that currently, the firms are sitting on an aggregate 529% gain.

Token unlocks are scheduled events where tokens allocated to early-stage investors and major development contributors are “released” after being frozen for a designated period of time. Crypto projects typically ensure that tokens are “locked up” to avoid large asset sales during periods of low liquidity, an event that could have a significant impact on price.

Optimism is what’s known as 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.

Related: Optimism’s major ‘Bedrock’ upgrade set for June 6

On June 1 last year, Optimism went live with its first airdrop, delivering OP tokens to nearly 250,000 addresses associated with early users of the network. On Feb. 9, 2023, the second major airdrop went through, distributing more than 11 million OP tokens to 307,000 unique addresses.

While the airdrops caused brief spikes of trading activity, the price of the OP token has been a general downward trend over the last few 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.

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