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Optimism (OP) Climbs Over 10% On Weekly Chart, Will The Rally Last?

Following a slight improvement in the broader cryptocurrency market, Optimism (OP) has posted positive gains today, August 2. The token is now over 10% higher than seven days ago. Optimism’s gain has placed it among the top-gaining coins today, with a nearly 3% gain in the last 24 hours. 

Optimism Price Action as Bulls Struggle to Prevail

According to CoinMarketCap data, Optimism peaked at $1.6712 on Wednesday morning, an over 5% increase from its past-day price. However, due to the intense struggle between the buyers and sellers, OP has receded from the day peak and is now traded at $1.63, with a 3.08% price increase.

Related Reading: Shiba Inu Price Prediction: Is Shibarium The Key To A Trend Reversal?

Optimism maintained a fairly bullish momentum from July 13 to August 2, reflected in its over 22% 30-day price increase. While the uncertainty about its next price action remains high, speculations suggest the following developments might influence the OP’s market outlook in the coming days.

Optimism Could Face Backlash Due To The Recent BASE Exploit

Coinbase’s newly launched BASE network built on the Optimism Stack reportedly witnessed a backdoor contract exploit, leading to the loss of 597 Ether worth approximately $1 million. 

According to on-chain investigations, the exploiters infiltrated a BASE Chain’s backdoor contract, continuously minted tokens, and sold them for profit. Data shows that the perpetrator address already minted 40 different tokens, generating approximately 597 Ether in profit, which has been moved out.

Speculations are that the exploit might impact all protocols linked to it, including the Optimism network, since BASE anchors the OP Stack. Also, the BASE hype attracted several new crypto addresses to the Optimism network. The recent hack may depress investor sentiment, potentially impacting OP’s price.

The number of active addresses on the Optimism network grew significantly over the last few months after BASE’s launch in late February. However, this growth could be stalled due to the unfortunate event on the BASE network.

OPUSD
OP Price Outlook; Will the Bulls Sustain the Rally?

The OP/USD daily chart demonstrates OP’s bullish momentum as the bulls fight to secure higher market positions for the coin. OP has surpassed its two critical support levels, and the bulls show no sign of stopping, evident in the short green candlesticks formed above the $1.631 support level.

The Moving Average Convergence/Divergence is above the signal line with green histogram bars that reflect the asset’s bullish momentum. In addition, the RSI has crossed the overbought region and now sits at 75, demonstrating increased buying pressure on OP. 

However, a bearish trend reversal is possible since the buyers have reached saturation and may recede due to a decline in momentum. 

As of the time of writing, OP trades at $1.63. But the next few hours are critical as the price could decline to $1.61 if the bears reclaim control.

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Abracadabra Protocol To Counter CRV Risk With 200% Interest Rate Hike

DeFi lending protocol, Abracadabra Money, is currently debating a proposal to boost the interest rate in its CRV lending markets as it looks to mitigate its exposure to the DeFi token. 

In the last few days, CRV  has seen its value decline significantly due to the recent Curve Finance exploit on Sunday, which resulted in a total loss of over $60 million. According to data from CoinMarketCap, CRV is currently trading at $0.56, with an 8.28% loss in the last 24 hours.

Abracadabra Exposed To Significant CRV Risk Levels

In a governance proposal submitted on Aug 1, DAO contributor and community manager Romy highlighted that Abracadabra was currently exposed to a substantial level of CRV risk.

To address this situation, the proposal contains a strategy that introduces collateral-based interest to both CRV cauldrons – lending markets – on Abracadabra.

Related Reading: Ethereum DeFi Coins Plunge As Curve Concerns Threaten Major Market Crash

Romy stated that Curve Finance, the underlying platform of CRV, has seen its TVL negatively affected over the last month by several events, including the Conic Finance Hack, the JPEG’d exploit, and the attack on Curve itself. 

In particular, Romy noted that the theft of $25 million from Curve’s CRV/ETH pool had impacted the on-chain liquidity for CRV, altering the conditions that led to the adoption of the token as a collateral asset on Abracadabra. 

In addition, the proposal also noted that Abracadabra had recorded CRV outflows toward markets with lower Loan-to-Value (LTV) ratios and higher interest rates. Together, all these factors have affected CRV’s price and liquidity, prompting the need for Abracadabra to reduce its exposure to the token.

 

Abracadabra’s Proposed Strategy To Introduce 200% Interest Hike

As earlier stated, Romy’s governance proposal aims to cover Abracadabra CRV’s risk by applying collateral-based interest to the two CRV lending markets on the platform. It was stated that this strategy had been previously implemented with the WBTC and WETH cauldrons. 

This introduction of collateral-based interests would allow Abracadabra to levy interest directly on each CRV cauldron’s collateral which is directly transferred to the protocol’s treasury and converted to Abracardra’s native stablecoin MIM, either via on-chain or off-chain transactions. 

Related Reading: Is It A Good Idea To Buy Curve Now? Here’s What This Founder Thinks

Based on projections, Romy stated that this strategy would allow Abracadabra to boost its treasury reserve and cut potential losses due to CRV exposure to about $5M borrowed MIM. 

Under the new proposed interest structure, the interest rates will be determined based on two factors: the combined outstanding principal of the CRV cauldrons and the collateral ratio of each cauldron. 

The base interest rate will vary depending on the total borrowed amount, classified into three ranges: $0M-$5M, $5M-$10M, and $10M-$18M. For instance, as the current outstanding principal stands at $18M, the base interest rate would be set at 200%. 

Using this rate, it is estimated that the loan would be completely covered in six months’ time. Furthermore, the collateral ratio would influence the interest multiplier, with ratios ranging from <= 40% to <= 70% correlating to multipliers of 1x, 5x, 10x, and 25x, respectively.  

According to the proposal, this interest rate structure ensures the maximum chances of “full principal recovery” for Abracadabra.

The voting session for this proposal commenced on Aug. 1. and will run for only 46 hours due to the supposed urgency of the matter. As of the time of writing, 51 members of the Abracadabra DAO have placed their votes, with 99.74% supporting the proposal. 

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Buying Pressure Incoming? MicroStrategy Files Notice With SEC To Sell $750 Million In Stocks

In a recent development, MicroStrategy, a US-based software firm, has announced intentions to raise about $750 million through stock sales. According to the platform, which is currently one of the biggest corporate holders of Bitcoin, proceeds realized from the sale will be used to purchase more Bitcoin.

More BTC For MicroStrategy?

In a filing with the United States Securities and Exchange Commission on August 1, MicroStrategy disclosed that it has entered into a sales contract with three companies, namely Canaccord Genuity, Cowen and Company, and Berenberg Capital, with respect to the sale of MicroStrategy’s class A common stocks. 

Since MicroStrategy is a publicly traded company, the sales are expected to be available to the general public and to take place on the stock market. The firm is guaranteed easy access to capital since its stock will be offered to every interested investor. 

According to MicroStrategy, the proceeds raised from the proposed sale would be applied to different corporate objectives, which according to MicroStrategy’s Chief Financial Officer Andrew Kang, shall include “.. the purchase of Bitcoin as well as the repurchase or repayment of outstanding debt.”

Bitcoin (BTC) price chart from Tradingview.com (MicroStrategy)

Bitcoin Price Reaction To The News

MicroStrategy is a firm founded by Micheal Saylor and one of the largest holders of Bitcoin. The firm presently holds 152,800 Bitcoin valued at $4.5 billion at the current market price. The firm purchased an additional 12,333 Bitcoin during the second quarter of the year and another 467 in July.

It is currently one of the most prominent champions of Bitcoin with a bold investment strategy to boost its Bitcoin holdings regardless of whether or not the market is trending. 

Speaking to Investors following the announcement, Chairman and founder of the firm Micheal Saylor noted that their objective “is to find ways to generate incremental Bitcoin for our shareholders and do that with either cash flow from the business or do it through intelligent accretive financings of equity or debt or other intelligent operations.” 

In reaction to the announcement, the price of Bitcoin rose to about 2%, increasing from $29,200 to $29,771 at the time of writing. Shareholders in the company also benefited following the ongoing Bitcoin rally, with shares increasing to nearly 200% since the beginning of the year.

According to data from Google Finance, MSTR shares have risen from $145.02 per share on January 3 to $434.98 at the time of publication. 

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Bitcoin Funding Rates Most Positive Since Feb, Long Squeeze Soon?

Data shows that Bitcoin funding rates have risen to the greenest levels since February 2023, something that could increase the risk of a long squeeze.

Bitcoin Funding Rates Are At Highest Levels Since February

As pointed out by an analyst in a CryptoQuant post, longs have accumulated in the market recently. The “funding rates” is an indicator that keeps track of the periodic fee that traders on the futures market are exchanging between each other right now.

Related Reading: Bitcoin Addresses In Loss Soar To One-Month High Amid Mixed Market Indicators

When the value of this metric is positive, it means that the long contract holders are currently paying a premium to the short holders so that they can hold onto their positions. This kind of trend implies that the majority of the market shares a bullish sentiment.

On the other hand, the indicator being below the zero mark suggests the payments are flowing the opposite way: shorts are paying the longs. Naturally, here the bearish mentality is the dominant force.

Now, here is a chart that shows the trend in the Bitcoin funding rates since the start of the year:

Bitcoin Funding Rates

As displayed in the above graph, the Bitcoin funding rates have surged during the past day as the cryptocurrency’s price has recovered back above the $29,000 level.

The rise implies that new long positions have appeared on the market, and the gap between the shorts and longs has widened. Following this increase, the funding rates have hit highly positive levels not witnessed since back in February of this year.

When the metric hit its high values back then, the cryptocurrency’s price had formed a local top and had started on a steep decline. The reason that the market reversed its trend even though the futures market traders were bullish was perhaps due to a long squeeze.

A “squeeze” is an event where a sharp swing in the price sets off a high volume of liquidations at once. Such liquidations only end up providing further fuel for the price move, thus prolonging it and causing even more liquidations. As such, liquidations can be imagined to cascade during a squeeze.

Whenever the futures market becomes overheated, the chances of this mass liquidation event taking place can go up. Generally, a squeeze is more probable to effect the side that has the larger amount of contracts. Naturally, this side would be reflected in the funding rates.

As the indicator’s value is highly positive right now, a long squeeze could have reasonable chance of happening. If one does take place in the near future, then the Bitcoin market could go down in a similar way as it did back in February.

BTC Price

At the time of writing, Bitcoin is trading around $29,500, up 1% in the last week.

Bitcoin Price Chart