Optimism [OP] is 97% from its all-time high of $4.85, and data shows that more losses could be on the way. The altcoin dropped by more than 23% in the past 24 hours, while the market was down by 2%.
The main driver of the drop was a fundamental change in its network as an Ethereum [ETH] layer 2 (L2) solution. The technical breakdown also played a key role in this price crash during the day.
Why is Optimism down today?
Soon after Base announced they would be moving from the OP Stack, it accelerated the declining price action of Optimism. The move looked to consolidate all its network operations on the Base chain to accelerate scaling.
The change meant that Optimism was losing a big chunk of transaction activity with revenue as the biggest stake. Base was the main contributor to the revenue of OP Stack; hence, this meant the impact could be huge.
Additionally, the sell volume spiked by more than 157%, per CoinMarketCap. About $187 million was pushing the price down, and it was the biggest volume in February for OP.
Moreover, Optimism Futures Flows showed that more than $7.5 million in capital left the exchange.
It represented a loss of 19% in only 12 hours while spot traders deposited $14.73 million into the exchange, probably for selling.
Still, there were spot traders who were buying OP and withdrawing from the exchange, and it accounted for $13.29 million. The net flow for Spot trades was $1.45 million OP.
Moreover, the decline accelerated as $1.28 million in longs were liquidated in just 24 hours, compared to only $80K in shorts. Will the price action of OP continue declining?
Is OP set for more decline?
Looking at the price action of OP, the altcoin has been falling freely since the start of the year. The drop came after the price invalidated an inverted heads-and-shoulders pattern that had faked out a bullish breakout.
The decline in the past 24 hours extended this year’s losses to about 60%. The Bull Bear Power (BBP), whose selling had cooled off, was now showing growth in its bars. This indicates a resurgence of seller momentum.
According to the analysis, OP was breaking the market structure each time by making new lows. Notably, its price was not revisiting the order block (OB) levels that initiated these breaks.
This indicator signaled a strong bear trend, suggesting more decline was coming, potentially even below $0.10.
However, a resurgence back above the $0.20 resistance level as support could shift the price direction. But the invalidation of the reversal pattern meant that bullish sentiment was not likely, at least for now.
Final Thoughts
- Optimism crashed 22% as Base drifted from OP Stack, and sell volume and capital increased.
- OP price was more likely to continue dropping unless it reclaimed the $0.20 resistance zone as support.
