Despite token airdrop, Optimism logs decline in user activity- Decoding ‘why’

• Optimism conducted an airdrop of its governance tokens to over 300,000 wallets on 9 February.
• User activity, however, continues to decline.

Despite an airdrop of 11.7 million OP tokens to over 300,000 wallets on 9 February, the price of Layer 2 (L2) token Optimism (OP) continues to decline, causing investors to lose confidence.

Realistic or not, here’s OP market cap in BTC’s terms

Per a blog post published on 9 February by the layer 2 blockchain’s caretaker group, Optimism Collective, the unannounced airdrop was made to users on the network that have delegated the voting power of their OP tokens and addresses that spent more than $6.10 on L2 gas since 25 March 2022. 

Grasping at straws?

In September 2022, Optimism introduced a set of 18 tasks called “Optimism Quests.” These quests aimed to improve the user experience by guiding users through different features on the network, such as swapping, lending, and staking. The program’s launch resulted in a significant increase in user numbers and daily transactions on the network.

However, since the end of the Quests on 17 January, the daily transaction count on the Optimism roll-up platform has decreased significantly.

According to data from IntoTheBlock, a comparison of activity between Optimism and Arbitrum showed that the daily transaction count of Arbitrum surpassed that of Optimism shortly thereafter.

Source: IntoTheBlock

The unannounced airdrop could be taken as an effort by Optimism to gain an advantage over Arbitrum. Presently, Arbitrum has a greater number of transacting wallets, with a total that is more than double that of Optimism, which has resulted in a growing difference between the two exchanges’ transacting wallets in recent months.

According to data from Dune Analytics, the number of daily active addresses on Optimism has decreased since the conclusion of its Quests program. In contrast, the number of daily active addresses on Arbitrum has increased. 

Although the Arbitrum network does not currently have a token, the rise in usage may be attributed to the desire of many users to become eligible for token airdrops once the L2 network launches its token.

Source: Dune Analytics

How much are 1,10,100 OPs worth today?

An airdrop is okay, but more might be required

According to CoinMarketCap, OP’s price has decreased by 14% since the airdrop. As of this writing, the altcoin traded at $4.14. 

An assessment of OP’s performance on the daily chart revealed a steady decline in buying momentum since the airdrop. Its Relative Strength Index (RSI) and Money Flow Index (MFI) have since fallen to touch their respective neutral lines.

With less liquidity in the OP market, these momentum indicators would breach their neutral zones precipitating a further decline in OP’s price. 

Source: OP/USDT on TradingView