Earlier in March, the Optimism Foundation disclosed the private sale of nearly $90 million worth of OP tokens to an anonymous buyer. These 19.5 million tokens, sold privately, were subject to a two-year lock-up period. At that time, the token unlock event, which was supposed to be held on March 29, was expected to cause a price decline, and many crypto influencers were not happy about it. But why?
Understanding how token unlocks impact cryptocurrency markets is vital for investors, so let's start with the basics.
What Is a Token Unlock?
A token unlock refers to the release of previously restricted tokens into circulation after a lock-up period. During this period, the tokens cannot be sold or traded, which helps maintain market stability as the project develops. When the lock-up period ends, these tokens can be traded, potentially affecting the token's price due to increased supply. If demand does not increase correspondingly, the price might drop.
When evaluating a coin's value, consider more than just the price. A significant portion of a coin's supply set to be released soon can negatively impact its value, regardless of its current price. Projects usually share their token supply schedules in documents or whitepapers, mentioning terms like emission, cliff, vesting, and unlocks that you need to be mindful of.
New cryptocurrency projects often allocate some tokens to the development team or founders with a vesting period, meaning these tokens are locked for a time before they can be accessed. This prevents the team from selling all their tokens at once, which could crash the price. Once the vesting period ends, the tokens are unlocked and available for use.
Do Token Unlocks Always Lower Prices?
When tokens are released and the supply increases, you might expect the price to decrease. Yet, that's not always the case. Sometimes, if demand is strong, all the newly released tokens are quickly purchased, especially in a bullish market.
However, in a bear market, we often observe prices starting to decline about a week or 10 days before the release date. This is because an increase in tokens entering the market can push prices down. This could be a favourable time to sell tokens or establish a short position. Alternatively, if you're considering buying, you might want to wait until after the release in order to benefit from a lower price.
How to Track Token Unlocks
The project’s official documents and whitepaper provide information on the token unlock schedule. Updates on the unlock schedule can be found by following the project on Twitter/other relevant social media platforms.
Examples of Token Unlocks from the Past:
1. CyberConnect (CYBER)
Unlock Date: November 14, 2023
Unlocked Tokens: 1,260,000 CYBER
Current Circulating Supply: 11,038,000 CYBER
CyberConnect operates as a decentralized social graph protocol on the BNB Smart Chain blockchain. Its purpose is to assist users and projects in overseeing social connections across various platforms. Through the CYBER token, users can purchase CyberID, participate in voting for protocol improvements, and cover transaction fees.
No significant price change was found during the CYBER unlock on CoinEx.
2. Filecoin (FIL)
Unlock Date: November 15, 2023
Unlocked Tokens: 5,450,000 FIL
Current Circulating Supply: 392,420,000 FIL
Filecoin offers decentralized data storage and incentives for users. Tokens were distributed to the Protocol Labs team and the Filecoin fund during the token unlock on November 15.
Price of Filecoin before and after the unlock on Nov 15, 2023 on CoinEx.
3. BitDAO (BIT)
Unlock Date: November 16, 2023
Unlocked Tokens: 172,980,000 BIT
Current Circulating Supply: 7,880,000,000 BIT
BitDAO, backed by Pantera Capital, Dragonfly, and other prominent players in the crypto industry, is among the biggest decentralised autonomous organisations. The token unlock on November 16 included a substantial number of tokens, which resulted in a decent price decrease due to the large volume in comparison to current daily trading volumes.
Major Token Unlocks Happening in Coming Weeks
June 2024 is expected to experience major activity in the cryptocurrency market, as token unlocks worth over $771 million are scheduled. This has the potential to cause market volatility, pressure to sell, and shifts in market perceptions.
1. 1inch
Release Date: June 1
Quantity Released: 98.7 million 1INCH
Value: $47.8 million
1inch is a decentralized exchange aggregator that identifies the most favourable trading rates across different DEXs. The upcoming token release on June 1 will make almost 100 million 1INCH tokens available.
2. Sui (SUI)
Release Date: July 1
Quantity Released: 64.19 million SUI (2.65% of total circulation)
Value: $65.8 million
Allocation: Series A and B investors, early contributors, Mysten Labs treasury, and community reserves
Previous Unlock: May 3, 2024, with a larger number of unlocked tokens
Price Impact: Experienced a 15% drop a week after the unlocking occurred
3. Ethena
Release Date: July 2
Quantity Released: 53.6 million ENA (3.62% of total circulation)
Value: $48.77 million
Ethena is a synthetic currency protocol on the Ethereum network, offering a crypto solution that is independent of traditional banking. On June 1, over 50 million ENA tokens will be released for ecosystem development.
4. dYdX (DYDX)
Release Date: June 11
Quantity Released: 1.55 million DYDX (0.55% of total circulation)
Value: $3.16 million
Allocation: Investors, founders, and their teams
Price Impact: Likely to experience a slight correction due to selling pressure from investors
Source: TokenUnlocks
As you can see from the above examples, a token unlock may have a positive, negative, or insignificant effect on its price. Which way the price goes depends not only on the unlock but also on other factors that are happening at that time. Make sure you do your own research and stick to CoinEx for updated information.
Disclaimer: Please note that the information provided on this website is intended for informational purposes only. CoinEx assumes no liability for any financial losses resulting from cryptocurrency trading. It is advised that you conduct your own research.
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