Downside Threat: These Two Cryptos Are at Risk of Crash Due to Unlock

The crypto market has shown signs of recovery in the past week, with top coins trading at the top of their ranges. However, the picture could turn red in the short term for some altcoins as the season kick-off unlocks.

As of this writing, Ethereum is trading at around $1,900 with sideways price action over the past 24-hours. Over the past week, the cryptocurrency was trading in the green but has been outperformed by altcoins such as XRP, Cardano (ADA), Polygon (MATIC) and its synthetic version, Lido Staked Ether (STETH).

Crypto Unlocked Threatens Altcoin Sector

Native Token for Ethereum-based scalability solution Optimism (OP) and Native Token for Needle Network (SUI), according to an analyst at Scimitar Capital Headed towards For a major retracement. These two coins will soon unlock a significant portion of their supply.

In the past, any increase in the circulating supply for the token resulted in increased selling pressure in the market. More supply, less demand for crypto, which translates into negative price action.

The analyst claims that SUI will see an unlock of 13% on its market capitalization, meaning $67 million in tokens, at current prices, are about to enter the market. On the other hand, the OP is about to see its market cap increase by over 110%.

In other words, about $580 million in OP will flood the altcoin market; According to the analyst, the likely scenario is that the coin will succumb to the downward pressure:

Optimism has seen a massive unlock this week, with over 114% of the current circulating supply unlocked. All else being held equal, this means the token should trade for much less than it does now, as price is a function of supply and demand more supply = lower price.

If the price of bitcoin and other cryptocurrencies cannot move upwards and break out of its current range, there is a possibility of re-testing the important support of SUI and OP. Other altcoins may also face a similar fate if the market conditions take a turn for the worse.

Unlocked Season Suggests Bearish Pressure, But Is Shorting A Bad Idea?

However, the team behind Optimism just announced a significant upgrade for the network. The second layer solution will reduce fees and increase performance a week after the OP unlocks the supply.

Other announcements have been made regarding the status of this network and its development. The analyst believes this is part of a strategy to offset the unlock and caution traders against shorting the token, despite the headwinds:

(…) Consider who you are trading against investors and the team is encouraged to coordinate and chatter on presellers as much as possible. do you really want pvp vs a16z and paradigm and optimism insider?

As mentioned, the downside price action is likely to continue in the SUI as well. Despite unlocking fewer tokens than the OP, the Sui Network team has a weak strategy to counter a potential sell-off event, which may provide better opportunities for traders.

Cover image from Unsplash, chart from Tradingview