Ethereum-based layer two solution ‘Optimism’ gained 300% in a month. Will the altcoin price increase further?
Popular altcoin listed on Binance continues its bear rally
Optimism is seeing a surge in adoption after the merge upgrade triggered Ethereum’s “Aggregation Centric Roadmap”. Optimism (OP) price has been rising rapidly since the beginning of July due to its proximity to Ethereum. Specifically, OP’s price rose nearly 300% in a month, reaching $2.31. This was the second highest level recorded on 4 August.
What is optimism? Why is it in high demand?
To summarize: Optimism is an Ethereum aggregation solution. In other words, the solution, called layer-2, manages a series of Ethereum’s off-chain transaction validations to increase scalability on the main chain. Optimism can benefit from the merge due to Ethereum’s “Aggregation Centric Roadmap” that transforms the main chain into a layout and data availability layer and distributes scalability to layer-2 aggregations via “danksharding”. Ally Zach, a researcher at Messari, shared what happens after the merge:
Currently, with the combined rollup and Ethereum architecture, the current Ethereum-only throughput of 15-45 TPS can be scaled up to 1,000-4,000 TPS. The introduction of shards has expanded data storage capacity for aggregations to increase this throughput up to over 100,000 TPS.
This data explains why the OP and other tiers 2 responded positively to the July 15 merge announcement.
OP price may drop 30% in August
Despite strong fundamentals, the OP’s technical metrics suggest that his rally could run out in the coming weeks. On the four-hour chart, the rising price of the OP coincides with the falling RSI, showing the “bearish divergence”. Meanwhile, an attempt to break above the $2 level has been unsuccessful since July 29. This includes a 15% drop after hitting $2.31 locally on August 4.
Therefore, a possible correction leads the OP to the $1.54 region. This convoluted level capped the OP’s downside attempt on Aug. Also, a break below the 50-4-week EMA draws the OP to $1.36, down 30% from today’s price. Interestingly, the $1.36 level also acted as support in August and coincides with several months of ascending trendline support.
As you follow on Kriptokoin.com, the OP price is currently trading just under $2. It gained double digits today. Unlike other altcoins, OP is only 57.16% down from its peak price. On the other hand, Ethereum price is trading at a 57.16% discount from the ATH price despite the recent rally. Ahead of the merge, ETH price retraced the $1,700 level.
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