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Optimism (OP) is currently exhibiting bearish signals, as technical patterns and on-chain data suggest a looming price correction.
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After a recent uptick, OP’s price has stalled at critical support levels, raising concerns among traders about its sustainability.
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“The head-and-shoulders pattern typically signals reversals, positioning OP for a possible downturn,” notes a COINOTAG analyst.
This article analyses the bearish trends in Optimism (OP), highlighting significant technical signals and on-chain data that indicate a potential price correction.
What’s driving OP’s bearish price action?
The current price action of OP is a clear indication of weakness, especially highlighted by the formation of a head-and-shoulders pattern. This pattern consists of three peaks – the left shoulder, the head, and the right shoulder – with the head forming a significant peak underlining market hesitation.
As of the latest data, OP is trading around a critical support level of $1.12. If this support does not hold, it could trigger a decline to support levels around $1.06 or lower. Investors should remain vigilant and closely monitor these price levels to anticipate potential market movements.
Source: TradingView
What do on-chain signals reveal about OP?
Analyzing the on-chain indicators conveys a more detailed narrative leading to a bearish sentiment for OP. Recent trends show that the net network growth has decreased by 0.87%, indicating a slowdown among new users and a reduction in network activity.
The “In the Money” metric has also dropped by 1.36%, which underscores the diminishing upward momentum. While there is a slight increase of 0.08% in concentration, this does not counterbalance the overall negative outlook highlighted by other on-chain data.
Additionally, a decline of 1.93% in large transactions points to diminishing market sentiment, further affirming the bearish trends facing OP.
Source: IntoTheBlock
Are most investors “In the Money” or “Out of the Money”?
Insights from the In/Out of the Money chart reveal that, at the current trading price of $1.12, approximately 90.74% of OP addresses are classified as “Out of the Money.”
This suggests a substantial number of holders are currently incurring losses, potentially leading to increased selling pressure if the downward trend persists.
Conversely, only 6.55% of addresses are considered “In the Money,” indicating a lack of buying interest at the present price levels.
Source: IntoTheBlock
What does the MVRV Long/Short Difference indicate?
The MVRV Long/Short Difference, currently sitting at -8.75%, serves as another bearish indicator. This ratio shows that long positions are being liquidated more than short positions.
This dynamic indicates trader sentiment is increasingly leaning towards the downside, reflecting a wavering confidence in the market’s ability to rebound and further supports the bearish stance for OP.
Source: Santiment
Is OP heading for a price correction?
The convergence of technical signals, on-chain metrics, and sentiment analysis all highlight that OP is at serious risk of a price correction.
The unmistakable head-and-shoulders pattern, alongside bearish on-chain data and a negative MVRV long/short difference, strongly suggest a forthcoming decline.
Ultimately, if OP is unable to sustain its critical support at $1.12, a further decline into lower price levels seems imminent, increasing the likelihood of a deeper retracement in the short to medium term.
Conclusion
In summary, both technical and fundamental analyses point towards a bearish outlook for OP. Investors should exercise caution and remain observant of market dynamics as the potential for a price correction becomes more pronounced.
