- OP formed a bearish head-and-shoulders pattern, signaling a potential price correction ahead.
- On-chain and sentiment indicators showed weakness, suggesting further downside risk for OP.
Optimism [OP] is showing significant bearish signals, as a well-formed head-and-shoulders pattern emerges. This pattern often foreshadows a price reversal, suggesting a potential correction could be underway.
OP was trading at $1.12, at press time, after gaining 5.34% in the past 24 hours. However, this price movement may not be enough to hold key support levels, and traders should stay alert for further price action.
What’s driving OP’s bearish price action?
The price action of OP shows clear signs of weakness, particularly with the formation of the head-and-shoulders pattern. The left shoulder, head, and right shoulder all appear symmetrical, with the head forming a notable peak.
Currently, the price is hovering around a critical support level of $1.12. If this support fails to hold, OP could break lower and potentially test $1.06 or even lower levels.
Investors should be cautious and monitor key price levels closely to anticipate the next move in the market.
Source: TradingView
What do on-chain signals reveal about OP?
Analyzing on-chain signals adds to the bearish outlook for OP. Net network growth dropped by 0.87%, indicating a slowdown in new users and decreased network activity.
Additionally, the “In the Money” metric declined by 1.36%, further emphasizing the lack of upside momentum. Concentration increased slightly by 0.08%, but it is not enough to outweigh the overall negative trend in the on-chain data.
Furthermore, large transactions decreased by 1.93%, suggesting weakening market sentiment and confirming the bearish outlook for OP.
Source: IntoTheBlock
Are most investors “In the Money” or “Out of the Money”?
The In/Out of the Money chart offers further insight into market sentiment. At the current price of $1.12, 90.74% of OP addresses are “Out of the Money.”
This indicates that the majority of holders are sitting on losses, which could lead to additional selling pressure if the price continues to decline.
Conversely, only 6.55% of addresses are “In the Money,” suggesting there is limited interest in buying at these levels.
Source: IntoTheBlock
What does the MVRV Long/Short Difference indicate?
The MVRV Long/Short Difference is another bearish indicator, currently sitting at -8.75%. This suggests that long positions are being liquidated more than short positions.
In other words, traders are leaning toward the downside, signaling a lack of confidence in the market’s ability to recover. This divergence further supports the bearish thesis for OP.
Source: Santiment
Is OP heading for a price correction?
All technical, on-chain, and sentiment indicators suggest that OP faces significant downside risks.
The head-and-shoulders pattern, coupled with bearish on-chain data and a negative MVRV long/short difference, points to a possible price correction.
Realistic or not, here’s OP market cap in BTC’s terms
If OP fails to hold critical support at $1.12, the price could decline further, potentially testing lower levels. Therefore, a deeper retracement seems more likely in the near term.
