Winds of change are blowing through the Ethereum Layer 2 ecosystem as native tokens of Optimism (OP coin) and Yield Guild Games (YGG) face unlocks planned this week. These unlocks, in which previously unavailable tokens were released, cast a shadow of potential selling on both assets, as evident in recent price movements.
OP coin and others are unlocked
In the cryptocurrency world, token unlocking means a predetermined release of initially locked tokens. This locking mechanism serves a very important purpose. It prevents project teams from flooding the market with tokens immediately after listing, potentially harming individual investors. However, when these locked tokens are released, they increase the circulating supply, which can cause downward pressure on the price. While some analysts believe unlocks reinforce current market trends, others view them cautiously as a potential catalyst for selloffs.
As of April 23, both OP and YGG are trading in the red compared to the top 20 most liquid cryptocurrencies. OP fell 3.5% in the last 24 hours, while YGG dropped 3%. This weakness coincides with the upcoming token unlocks – Optimism is set to release 2.3% of its total OP supply (worth approximately $24.16 million), while YGG is set to release an additional 5.3% of its circulating supply (approximately $16 million). worth $.7 million) will see it hit the market.
The downward trend in coins continues
The bearish sentiment surrounding these unlocks is further strengthened by the tokens’ recent performance. Over the past two weeks, OP witnessed a significant decline of 24%, while YGG fared even worse, dropping roughly 32%. These price declines indicate that investors may be expecting a potential sale once the lock is opened.
dYdX (DYDX), another prominent player in the Layer 2 space, presents a contrasting picture. There is also a scheduled token unlock on May 1, slated to release 10.7% of its circulating supply (worth approximately $78 million), but DYDX’s price action has not mirrored its peers. Unlike OP and YGG, DYDX is down only a modest 1.2% in the last two weeks. This flexibility can be attributed to a variety of factors, such as greater unlock size ahead or a stronger perception of DYDX’s long-term potential. As a result, the upcoming token locks for OP and YGG have added some uncertainty to the layer 2 market.
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