Boosting Optimism Protocol: Can Incentives Drive OP Prices Higher?
September 11 2023 - 3:45AM
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Optimism (OP) has been at the forefront of the blockchain industry
with its incentive program, which recently led to the protocol’s
cumulative trading volume exceeding an impressive $3.8 billion.
Analyst Ryan Holloway has shed light on the remarkable impact of
Optimism’s incentive program. The availability of OP trading
rewards and incentives on various platforms, including Polynomial,
played a pivotal role in this surge in usage metrics. Related
Reading: Shiba Inu Tallies 77% Accumulation By Major Investors –
Good For SHIB Price? The incentivization strategy employed by
Optimism has proven wildly successful, resulting in an astounding
23-fold increase in trading volume for the protocol. This
achievement, however, comes with a caveat, as it raises questions
about the composition of this newfound trading activity. Just
dropped an analysis with @t__norm on the impact of @PolynomialFi‘s
OP incentive program that ultimately led to the protocol’s
cumulative trading volume surpassing $3.8B 🧵 👇
pic.twitter.com/UahucTcVJ0 — Ryan Holloway (@raholloway) September
9, 2023 Rise In Trading Volume Masks Optimism’s Growth In Daily
Traders While the surge in trading volume is undoubtedly
impressive, a deep analysis reveals a more nuanced picture. The
growth in daily traders has been relatively modest, suggesting the
possibility of a significant rise in power users or, in a less
favorable scenario, potential wash trading activities. But what
exactly is wash trading? Wash trading involves artificially
inflating trading volumes by executing simultaneous buy and sell
orders for the same asset, giving the illusion of increased demand
and activity. This practice is illegal in traditional financial
markets and is viewed negatively in the cryptocurrency space due to
its potential to mislead investors. Optimism market cap currently
at $1 billion. Chart: TradingView.com Optimism Faces DeFi Sector
Headwinds Optimism has faced its fair share of challenges in
gaining a foothold in the competitive DeFi sector. Recent reports
indicate a notable decrease in total value locked and decentralized
exchange volumes on the network in recent weeks. This decline in
activity is reflected in the network’s financials, with revenue
plummeting by 37.5% in the last month, accompanied by an overall
activity decrease of 19.7% over the same period. Despite these
setbacks, Optimism’s native token, OP, currently holds a price of
$1.26 according to CoinGecko, with a 0.9% gain in the last 24
hours. However, it has seen a 6.2% decline over the past week.
Related Reading: Massive PEPE Token Dump: Whale Unloads 762 Billion
At Loss As Price Wobbles Sustainability And Challenges In
Optimism’s Post-Incentive Era The sustainability of Polynomial’s
retention rates after the conclusion of the incentive program will
be a crucial factor in determining its long-term impact on
Optimism. As the network navigates the challenges posed by wash
trading concerns and its struggles to establish a firm presence in
DeFi, the cryptocurrency community will be closely watching for
signs of resilience and adaptability. While Optimism’s incentive
program has undeniably driven an astonishing surge in trading
volume, the sustainability of this growth and the resolution of its
challenges will determine the protocol’s long-term success in the
highly competitive world of cryptocurrency. (This site’s content
should not be construed as investment advice. Investing involves
risk. When you invest, your capital is subject to risk). Featured
image from Insperity
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