The price of Optimism (OP) has been skyrocketing since the beginning of July due to its proximity to ETHereum.
Notably, OP's price rallied by nearly 300% in over a month to reach $2.31, its second-highest level on record, on Aug. 4. The token received its bullish cues primarily from the euphoria surrounding ETHereum's potential transition to proof-of-stake in September via an upgrade called "the Merge."
"Currently, with the combined rollup and ETHereum architecture, the current Ethereum-only transaction throughput of 15–45 TPS could scale to as much as 1,000–4,000 TPS," notedAlly Zach, a researcher at Messari, adding:
"The introduction of shards has expanded the data storage capacity for rollups to increase this throughput to [the]north of 100,000 TPS."
That explains why OP and other layer-2 tokens have responded positively to the Merge announcement on July 15.
OP price could drop 30% in August
Despite strong fundamentals, OP's technical metrics suggest its rally could exhaust in the coming weeks.
On the four-hour chart, OP's rising price coincides with its falling relative strength index (RSI), indicating "bearish divergence." Meanwhile, the attempted breakout above the $2-level has faced strong rejection twice since July 29, including its 15% drawdown after peaking out locally at $2.31 on Aug. 4.
Therefore, an extended correction could have OP test its 50-4H exponential moving average (50-4H EMA; the red wave) near $1.54 as its interim downside target. This curvy level has limited OP's downside attempt on Aug. 2.
