The optimism token has continued to struggle in a challenging market environment, with its recent rally coming to a halt. As of October 10, the token was trading at $1.5140, marking a 70% decline from its peak earlier this year.
One of the key reasons behind Optimism’s decline is its loss of market share in the industry. Competing layer-1 networks like Avalanche and Sui, as well as popular layer-2 networks like Base and Arbitrum, have surpassed Optimism in key areas such as decentralized finance.
The total value locked in DeFi on the Optimism network has dropped to $627 million from its peak of $1.04 billion. Additionally, the volume of stablecoins in the ecosystem has decreased from $1.35 billion to $1.17 billion.
Moreover, Optimism’s role in the DEX index industry has diminished, with a 24% decline in weekly volume to $503 million. In contrast, Sui’s and Base’s volumes have seen significant increases during the same period.
The token’s price took a hit after the release of its fifth airdrop, which unlocked 10 million OP tokens to 54 million unique addresses. With 500 million OP tokens remaining for future airdrops, existing holders may experience further dilution.
Most of this dilution is expected due to Optimism’s circulating supply of 1.25 billion tokens against a maximum supply of 4.29 billion. The network recently unlocked 49.19 million tokens in September, with the final unlock scheduled for 2026.
Additionally, Optimism’s volume in the futures market has seen a decline, with open interest dropping to $104 million from its year-to-date high of $327 million.
Potential downside for Optimism token
Looking at the daily chart, the OP token has been on a downward trend since reaching $4.86 in March. It has remained below the 50-day and 100-day Exponential Moving Averages, with the Relative Strength Index indicating a downward trend.
Furthermore, a bearish flag pattern has formed, suggesting the possibility of a bearish breakout. In such a scenario, the token could potentially drop and retest support at $1.06, its lowest point in August.