The crypto market has shown signs of recovery over the past week, with top coins trending towards the top of their range. However, the picture may turn red for some altcoins in the short term as the season starts to unlock.
At the time of writing, Ethereum is trading at around USD 1,900 with sideways price action over the past 24 hours. In the past week, the cryptocurrency traded in the green but outperformed altcoins such as XRP, Cardano (ADA), Polygon (MATIC), and its synthetic version Lido Staked Ether (stETH).
Crypto Unlocks Altcoin Sector At Risk
According to an analyst at Scimitar Capital, the native token for the Ethereum-based scalability solution Optimism (OP) and the native token for the Sui Network (SUI) are ready for a major setback. These two tokens will soon unlock a large portion of their supply.
In the past, any increase in the circulating supply for a token led to increased selling pressure in the market. The more supply, the less demand for the crypto, which translates into downward price action.
The analyst claims that SUI will see a 13% unlock on its market cap, meaning $67 million in the token, at current prices, is about to hit the market. On the other hand, OP is about to see a more than 110% spike in its market cap.
In other words, about $580 million in OP will flood the altcoin market; according to the analyst, the likely scenario of the token succumbing to downward pressure is:
Optimism has unlocked a massive unlock this week with over 114% of the current circulating supply. All else being equal, this means that the token should be trading much lower than it is now, as the price is a function of supply and demand, more supply = lower price.
If the price of Bitcoin and other cryptocurrencies cannot move up and break out of their current range, SUI and OP will likely retest critical support. Other altcoins could suffer the same fate if market conditions worsen.
Will unlock seasonal tips on bearish pressure, but shorting is a bad idea?
However, the team behind Optimism has announced a major upgrade to the network. The second tier fix reduces costs and increases performance one week after unlocking the OP supply.
Other announcements have been made regarding the status of this network and its development. The analyst believes this is part of a strategy to offset the unlocks and warn traders against shorting the token despite the adverse conditions:
(…) think about who you are trading against the investors and the team is incentivized to coordinate and screw up presellers as much as possible. Do you really want pvp vs a16z and paradigm and the insiders of optimism?
As mentioned earlier, SUI is also likely to continue to see downward price action. Despite unlocking fewer tokens than OP, the Sui Network team has a weaker strategy to counter the potential selling event, which could provide a better opportunity for traders.
Cover image of Unsplash, chart from Tradingview
