Optimistic to see an increase in adoption after the merge update launches Ethereum’s “rollup-centric roadmap.”

Optimism (OP) price has skyrocketed since early July due to its proximity to Ethereum.

Notably, the OP price surged nearly 300% in a month, hitting $2.31 on Aug. 4, the second-highest on record. The token received bullish signals mainly due to the euphoria associated with Ethereum’s potential move to proof-of-stake. in September through an update called “The Confluence”.

Four-hour OP/USD price chart. Source: Trade View
Why “optimism”
Recall: Optimism is a cumulative solution from Ethereum. In other words, the so-called Layer 2 solution processes the off-chain Ethereum transaction validation package to increase scalability on the main chain.

Optimism may benefit from the merger as Ethereum’s Collapsing Focused Roadmap transforms its mainchain into a settlement and data availability layer, putting scalability in the hands of Layer 2 mergers through Danksharding.

“Currently, with Ethereum’s combined rollup and architecture, the current pure Ethereum transaction throughput can increase from 15-45 transactions per second to 1000-4000 transactions per second,” noted Ellie Zach, researcher at Messari, adding:

“The introduction of shards has expanded the capacity of convolutional data storage to increase that throughput to [] north of 100,000 TPS.”
This explains why OP and other Tier 2 tokens reacted positively to the July 15 merger announcement.

Ethereum Layer 2 tokens and their performance over different timeframes. Source: Messari
The OP price could fall 30% in August
Despite strong fundamentals, OP technicals suggest the rally could dry up in the coming weeks.

On the four-hour chart, the OP’s price surge coincides with its falling Relative Strength Index (RSI), indicating a “bearish divergence”. Meanwhile, an attempt to break above $2 since July 29 has been strongly rejected twice, including a 15 percent drawdown from a local high of $2.31 on August 4.

OP/USD 4 hour price chart. Source: Trade View
Therefore, an extended correction could see the OP testing its 50-4 hour exponential moving average (50-4 hour EMA; red wave) near $1.54 as an interim target on the downside. This tortuous level crowned the August 2nd OP attempt below.

Related: Ethereum’s average gas fee drops to $1.57, its lowest level since 2020

Additionally, a break below the 50-4H EMA could push the OP to $1.36, 30% below the August 4 price. Interestingly, the $1.36 level in August also served as support and coincides with multi-month support for the rising trendline.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every step of investing and trading involves risk, you should do your own research when making a decision.

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Source: CoinTelegraph