The crypto market has shown signs of recovery over the past week. Some altcoin projects have trended towards the top of their range. However, with the start of the unlock season, the chart risks turning red in the short term for some altcoins. Here are the details…
Risk of “pullback” for two altcoins?
According to an analyst at Scimitar Capital, Ethereum-based scalability solution Optimism (OP) and native token for Sui Network (SUI) are preparing for a major pullback. These two tokens will soon unlock the bulk of their supply. In the past, any increase in the circulating supply for a token has resulted in increased selling pressure in the market. More supply means less demand for crypto. This translates into downward price action.
The analyst points out that SUI has a 13 percent unlock in market cap. In other words, he claims that $67 million tokens are about to enter the market at current prices. The OP, on the other hand, is about to see an increase in market capitalization of over 110 percent. In other words, about $580 million in altcoins will enter the market in the OP. According to the analyst, the likely scenario is for the token to succumb to downward pressure. The analyst uses the following statements:
Optimism will unlock more than 114 percent of the current circulating supply this week. All else being equal; It is known that price is a function of supply and demand. Generally, more supply = lower price. This means that the token should be trading much lower than it is now. If the price of Bitcoin and other cryptocurrencies fails to move up and break out of their current ranges, SUI and OP are likely to retest critical support. Other altcoins could face a similar fate as market conditions worsen.
https://twitter.com/thiccythot_/status/1663462947090321408
Is it unreasonable to “short” during the unlocking process?
However, the team behind Optimism has announced a major upgrade for the network. The Layer-2 solution will lower network fees a week after the OP unlocks its supply. It will also improve the performance of the network. There were other announcements regarding the status and development of this network. The analyst believes this is part of the strategy to balance the unlocking. Therefore, it warns traders against short selling the token despite adverse conditions. The analyst says:
Consider who you are dealing with. Investors and the team are encouraged to coordinate as much as possible with pre-sellers. Do you really want to “PvP” against those in a16z and Paradigm and Optimsim?
As mentioned, SUI is also likely to continue to see downward price action. Despite unlocking fewer tokens than the OP, the Sui Network team has a weaker strategy to counter the lead event. According to the analyst, this could also provide a better opportunity for traders.
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