LayerZero (ZRO) Defies Bear Market Amid Retail Interest and Upcoming Token Unlock

LayerZero (ZRO) has gained roughly 7% over the past week, defying broader bearish sentiment in the cryptocurrency market.

Increased retail interest and rising futures Open Interest (OI) on platforms like CoinGlass suggest capital inflow into the asset.

However, on-chain activity metrics show a decline in daily transactions and active users, raising questions about the sustainability of the price rally.

LayerZero's recent performance has been driven largely by retail demand, as indicated by rising futures Open Interest (OI) on derivative platforms. The OI for ZRO has increased to $105.56 million, the highest since December 2024. This suggests that traders are either adding leverage or expecting further price appreciation. The capital inflow is likely being driven by the broader market's search for assets that can outperform in a weak environment.

Despite this bullish trend, the on-chain metrics tell a different story. The number of daily transactions and active users has dropped significantly compared to previous weeks. As of the latest Dune dashboard update, the daily transactions have fallen from 19.59 million to 5.75 million, while active users have declined from 486,155 to 307,685. These numbers are in line with the broader market weakness affecting most blockchain ecosystems.

The upcoming token unlock of 25.70 million ZRO tokens on February 20 poses a notable risk to the price action. This unlock would increase the circulating supply by 5.98%. Historically, previous unlocks have been followed by short-term recovery, but the market's ability to absorb such supply pressure remains uncertain, especially in the current bearish environment.

Why LayerZero Is Attracting Retail Investors?

Retail traders are gravitating toward ZRO due to a combination of price performance and the broader narrative of cross-chain infrastructure. LayerZero is an omnichain interoperability protocol that enables seamless communication between different blockchains. Its ZRO token is used for governance and is positioned as a key infrastructure asset for Web3. This utility has likely contributed to the asset's appeal during a period of market volatility.

The growing retail interest is also supported by rising futures trading activity. An increase in the notional value of outstanding contracts suggests that traders are either increasing their exposure or leveraging their positions. This dynamic can amplify both upside and downside movements, depending on market sentiment and liquidity conditions.

Market Implications of Token Unlocks and On-Chain Metrics

The interplay between token unlocks and on-chain metrics is a key factor in LayerZero's price behavior. The upcoming unlock is a significant event, with 25.70 million tokens set to enter the market. This represents nearly 6% of the circulating supply, a sizeable amount that could add downward pressure if not absorbed by sufficient demand.

Historically, LayerZero has shown resilience after similar unlocks. The market has absorbed previous supply increases, often resulting in a short-term recovery. However, the bearish environment of 2026 introduces more uncertainty. In weaker markets, even smaller supply injections can lead to price drops if liquidity is not strong enough to absorb the increased supply.

On-chain metrics such as daily transactions and active users are also critical in evaluating the health of the asset. A sharp decline in these metrics suggests that the underlying demand for the token may not be as robust as the price action might imply. This divergence between price and on-chain metrics is a common theme in crypto markets and can signal potential risks for investors.