Ethereum’s L2 solution ‘Optimism’ rallies 300% in a month — Will OP price gains sustain?

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The cost of Optimism (OP) has been skyrocketing because the starting of July because of its proximity to Ethereum.

Significantly, OP’s value rallied by way of just about 300% in over a month to succeed in $2.31, its second-highest point on report, on Aug. 4. The token gained its bullish cues basically from the euphoria surrounding Ethereum’s possible transition to proof-of-stake in September by way of an improve known as “the Merge.”

OP/USD four-hour value chart. Supply: TradingView

Why the “Optimism”

To recap: Optimism is an Ethereum rollup answer. In different phrases, the so-called layer-2 answer handles a package deal of Ethereum’s transaction verifications off-chain to spice up scalability at the major chain.

Optimism may just get pleasure from the Merge because of Ethereum’s “Rollup-Centric Roadmap,” which turns its major chain right into a agreement and knowledge availability layer and puts scalability within the fingers of layer-2 rollups by way of “danksharding.”

“These days, with the blended rollup and Ethereum structure, the present Ethereum-only transaction throughput of 15–45 TPS may just scale to up to 1,000–4,000 TPS,” famous Best friend Zach, a researcher at Messari, including:

“The creation of shards has expanded the knowledge garage capability for rollups to extend this throughput to [the] north of 100,000 TPS.”

That explains why OP and different layer-2 tokens have answered definitely to the Merge announcement on July 15

Ethereum layer-2 tokens and their performances on other timeframes. Supply: Messari

OP value may just drop 30% in August

In spite of robust basics, OP’s technical metrics recommend its rally may just exhaust within the coming weeks.

At the four-hour chart, OP’s emerging value coincides with its falling relative power index (RSI), indicating “bearish divergence.” In the meantime, the tried breakout above the $2-level has confronted robust rejection two times since July 29, together with its 15% drawdown after peaking out in the neighborhood at $2.31 on Aug. 4.

OP/USD 4-hour value chart. Supply: TradingView

Subsequently, a longer correction can have OP take a look at its 50-4H exponential transferring reasonable (50-4H EMA; the purple wave) close to $1.54 as its intervening time drawback goal. This curvy point has restricted OP’s drawback strive on Aug. 2.

Comparable: Ethereum reasonable gasoline charge falls right down to $1.57, the bottom since 2020

Additionally, a smash under the 50-4H EMA may just push OP to $1.36, down 30% from Aug. 4’s value. Apparently, the $1.36-level additionally served as toughen in August and coincides with a multi-month ascending trendline toughen.

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