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Will Optimism’s Downtrend Continue or Reverse? Assessing…
Optimism (OP) has been trending downwards in recent times, leaving investors uncertain about the future of the cryptocurrency. The question on everyone’s lips is whether this downtrend will persist or if there’s a chance of reversal.
An analysis of OP’s current situation reveals that it may be on the verge of breaking out from a massive head-and-shoulders pattern, which could signal further downside momentum. This bears similarities to past bearish phases where declining adoption rates correlated with price consolidation or continued declines.
The data suggests that investors have remained cautious about OP’s next move as the price teeters near a critical support level. In light of this information, we need to assess whether Optimism will continue its downtrend or reverse course.
An examination of OP’s chart shows it has been forming a head-and-shoulders pattern, which often signifies bearish reversals. The left shoulder peaked around $2.70, the head formed near $4.50, and the right shoulder recently completed below $2.50. If this breakdown is confirmed, further losses are possible, potentially targeting lower support levels.
Interestingly, the perpetual contracts Long/Short Ratio has surged above 2.60, revealing a stronger bullish bias. Historically, such high Long/Short Eatios in perpetual contracts have often preceded liquidations as over-leveraged traders become vulnerable to market swings. This could lead to a sharp correction if OP continues trending downwards, resulting in long liquidations and pushing prices toward lower support levels.
Furthermore, the supply-demand balance is concerning. Over the past year, Optimism’s circulating supply has grown by 69.27%, reaching 1.62 billion tokens. The sharp increase in supply, coupled with a decline in price, suggests increased sell pressure or inflation outpacing demand. If this trend continues and demand fails to catch up, it could result in extended downtrends.
However, should accumulation resume and stabilize the market, preventing further drops below $1.00, OP’s value may recover.
Source: https://ambcrypto.com/will-optimisms-downtrend-continue-or-reverse-assessing
