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Market Downturn? Not For Optimism: A16z’s Major OP Purchase Sends Price Skyrocketing By 9%

In a month marked by a challenging correction in the crypto market, Layer 2 (L2) blockchain protocol Optimism has emerged as a standout performer. Within the past 24 hours, Optimism’s native OP token skyrocketed by 9%, positioning it as the best-performing token among the top 100 cryptocurrencies. 

Behind this surge lies venture capital firm a16z, which has reportedly invested around $90 million in Optimism’s OP token, signaling further institutional support for the layer 2 protocol. 

OP Receives Major Investment

Sources familiar with the matter have revealed to Unchained that a16z has acquired a significant stake in Optimism’s OP token. 

The investment, which comes with a two-year vesting period, underscores a16z’s interest in the Layer 2 protocol and aligns with its growing involvement in crypto. Notably, a16z’s portfolio already includes crypto exchange Coinbase. 

The investment by a16z comes amidst notable activity and growth within the Optimism ecosystem. Optimism’s OP Stack has experienced increased usage, further validating its value proposition. The protocol’s ability to increase scalability and reduce fees on the Ethereum blockchain has also garnered significant attention. 

Optimism’s spokesperson expressed enthusiasm for the investment, acknowledging the energy and momentum surrounding the protocol. The partnership with a venture capital firm like a16z is expected to fuel further development and innovation within the Optimism ecosystem.

On March 7, the Optimism Foundation disclosed the sale of approximately 19.5 million OP tokens, valued at nearly $90 million, to an undisclosed buyer. 

These tokens were reportedly sourced from a 30% pool of OP’s original treasury, dedicated to the foundation’s working budget. Reports indicated that the buyer could delegate their tokens to third parties, enabling them to participate in Optimism’s governance.

The foundation clarified that, due to the private nature of the sale, specific details regarding the terms and purchaser were not disclosed. 

Key Levels To Watch For Optimism

Despite the recent surge in the Optimism ecosystem and its native token OP, the token still trades well below its all-time high (ATH) reached on March 6, 2024, currently down over 47% from that level.

However, OP’s trading volume has experienced a notable surge, indicating continued interest in the token. According to CoinGecko data, the OP trading volume has increased by over 113% compared to the previous trading day on April 30, amounting to nearly $600 billion in 24 hours.

Optimism

Key levels to monitor for the token soon include OP’s significant resistance at the $2.62 price mark and a potential retest of the $3 zone. 

However, a clear indication of a positive trend for the Optimism token would require a successful consolidation above the $3.92 zone, marking the end of the month-and-a-half downtrend structure.

Conversely, the $2.37 zone has proven to be a crucial support level for OP, as it has held for the past five days and prevented further price decline for the token. 

Digging deeper, the $2.25 mark is also a key support, with the most critical support level at $2.11. This level holds the key to Optimism’s macro bullish structure, as it initiated the token’s current uptrend.

Featured image from Shutterstock, chart from TradingView.com 

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Optimism To Sell 116 Million OP Tokens Via Private Sale: Will The Price React?

Optimism has revealed its plans to sell 116 million OP tokens to seven private buyers. According to the update, this sale is for treasury management tokens. 

Based on current prices, this sale will transfer approximately $159 million worth of OP tokens to the buyers. Given the sheer amount of the sale, some traders believe it will likely cause a decline in OP’s price.

Optimism Announces Sale OF 116 Million OP Tokens Following Third Airdrop Event 

In detail, Optimism posted a community update on September 20 on selling approximately 116 million OP tokens. The tokens are from the unallocated portion of the OP Token treasury, and these tokens are part of the Foundation’s original working budget of 30% of the initial OP supply.

According to the update, the tokens are subject to a two-year lockup. During the lockup period, the purchasers can delegate the tokens to third parties for on-chain governance.

Also, the announcement stated that from September 20, several transactions will take place with the released tokens. It noted that the transactions are pre-planned. 

It bears mentioning that this token sale comes a few days after Optimism announced its third OP airdrop to reward community members for participation in on-chain governance. Optimism released over 19 million OP tokens to over 31,000 unique addresses. 

Meanwhile, the OP community received the announcement with mixed reactions, with one user expressing disappointment. He expressed concerns that the token sale will increase Optimism’s circulating supply, impacting the price.

Optimism’s Private Token Sale: Will It Affect OP’s Price?

Some observers have expressed concern that the sale will affect OP’s price negatively, as the buyers may dump their tokens. However, there are a few reasons why this is unlikely to happen.

Firstly, the sale is private, meaning the buyers are not required to disclose their identities or intentions for the tokens. Therefore, it makes it difficult for traders to anticipate the buyers’ actions.

Secondly, the tokens are from the OP treasury’s unallocated portion and are not part of the circulating supply. It means that the sale will have a minimal impact on the availability of OP on the open market.

Furthermore, the tokens are subject to a two-year lockup period. The lockup prevents buyers from selling them on secondary markets until at least 2025, reducing the likelihood of a sell-off that could depress price.

Overall, Optimism can fund its development by raising capital from investors without relying on the public. Such action could lead to increased demand for OP from bullish investors on the project’s long-term prospects.

OPUSD price chart

Historical Data Suggests Private Sales Could Boost OP Price

Other projects have held similar private sales in the past. Recall that Polygon raised $450 million last year in a private token sale led by Sequoia Capital India. Also, in 2021, Arbitrum raised $120 million in a private token sale led by Lightspeed Venture Partners.

In both of these cases, the private token sales positively impacted the price of the respective tokens. The Polygon MATIC’s price increased by over 50% in the two weeks following the announcement of the private sale. 

Similarly, the price of AAVE increased by 20% in the two weeks following Arbitrum’s private sale announcement.

Therefore, based on this historical precedent, the private sale could benefit OP in the long run. However, note that the cryptocurrency market is volatile, and OP’s price is not guaranteed to increase.