The price of a cryptocurrency is usually determined by the forces of demand and supply just like other assets.
When crypto traders and investors scout for projects to invest in or when keeping up with investments it is important to gauge the token unlock schedule of a project.
If the supply of a token increases without a corresponding increase in demand the price is bound to fall.
So when scrutinizing projects it is important to add “Token Unlocks” to your list of metrics.
Now let’s dive into what Token Unlocks are along with 10 upcoming projects with huge Token Unlocks and more importantly how to trade and navigate them.
Also Read: 5 Narratives To Pay Attention To in 2023
What Are Token Unlocks?
Token Unlocks are simply the release of previously locked or restricted tokens into the market meaning the unlocked tokens can now be bought and sold.
The period in which these tokens are locked up or restricted is known as a vesting period so at the end of a vesting period projects unlock tokens and they are released to recipients.
Information about a project’s token unlock can be found in a project’s Tokenomics or Whitepaper which are usually publicly available on the website of a project.
Two terms usually spring up when it comes to token unlocks “Cliff Unlocks” and “Linear Unlocks”.
- Cliff Unlocks – This is when tokens held in a locked state are released at once on a specific date, usually a Y amount of the token’s total supply is said to be released at X date.
- Linear Unlocks – Here tokens are released at a steady fixed rate over a period of time. For example, if 31% of a token’s total supply is set to be unlocked within a month, the project might be releasing 1% per day.
In some cases, projects will be releasing every x% of tokens per transaction block or as a reward to liquidity providers or other forms of incentives.
Tokens are locked up because during seed and funding rounds projects sell tokens to investors at cheap rates and tokens are also allocated to founders, developers and other contributors.
If all of these actors decide to sell a large portion of their holdings when a token is listed on exchanges this will create strong sell pressure and might send the price crashing.
So to prevent that scenario project lock-up tokens and have vesting schedules.
Token unlocks increase the supply of that particular token and this can impact the price.
For example, Axie Infinity’s token AXS saw downward movements in its price action in the days leading to its unlock.
They were set to unlock 18.89 million tokens which amounted to 7% of the token’s total supply worth $164.15 million using prices as of 19th of April which was $8.69.
The price of AXS started falling from $8.69 on the 19th of April to $7.72 on the day of unlock which was on the 23rd of April, by April 25th it was at $7.64 before increasing to $8.28 on the 26th of April. Although this downward pressure might also be due to other market factors.
Remember an increase in supply without a corresponding or higher increase in demand usually leads to a fall in price.
Token unlocks increase the supply of a token because of this, token unlocks are widely considered bearish catalysts because recipients of the tokens can sell their holdings increasing the supply in the market.
Upcoming Projects With Huge Token Unlocks
In this section kindly note that price figures, market caps, and fully diluted values along with any other figure are valued as at the time of writing this article and the type of token unlocks are Cliff unlocks.
Let’s dive in.
1. Avalanche(AVAX)
Avalanche is a layer one blockchain that functions as a platform for decentralized applications. It is a blockchain for smart contracts.
Avalanche has a higher transaction output than Ethereum, it can handle up to 6,500 transactions per second without compromising scalability
Avalanche’s $AVAX has a fully diluted market cap of $12.5 billion with 49.81% of tokens unlocked. The protocol will unlock 1.325% of its total supply on May 28th, 2023. The price of $AVAX is $17.37 with a market cap of $5.69 billion.
2. Blur (BLUR)
Blur is a non-fungible token (NFT) marketplace and aggregator platform that offers advanced features such as real-time price feeds, portfolio management and multi-marketplace NFT comparisons.
$BLUR, which is the native governance token of Blur has a fully diluted market cap of $1.89 billion with a market cap of $285 million trading at $0.633.
80% of BLUR’s total supply is still locked, and the NFT marketplace is set to unlock 195,999,999 BLUR tokens (6.5% of total supply) which is worth $124 million. The unlock is scheduled for the 14th of June, 2023.
3. Tornado Cash (TORN)
Tornado Cash is a decentralized, noncustodial privacy platform created on Ethereum. Using the platform’s smart contract solution, users can deposit and withdraw ERC-20 tokens and ETH with different addresses, thus enhancing transaction privacy and anonymity.
Tornado Cash ($TORN) has a fully diluted market cap of $80,224,042 with 64% of tokens unlocked and a market cap of $8.8 million trading at $8.
The protocol will unlock 1.8% of its total supply which is 175,000 $TRON worth $1.4 million on May 7th, 2023.
4. LooksRare (LOOKS)
LooksRare is an NFT marketplace that rewards traders, collectors and creators with LOOKS and other incentives. It prides itself on being founded “by NFT people for NFT people.”
$LOOKS has a market cap of $106.1 million with a fully diluted valuation of $130 million. LOOKS has 81.67% of its total supply unlocked already.
On 15th June 2023, LooksRare will unlock 37,500,000 $LOOKS which is 3.8% of its total supply valued at $4.8 million. LOOKS is currently trading at $0.12.
5. Hedera (HBAR)
Hedera is a fully open-source public distributed ledger that utilizes the fast, fair, and secure hashgraph consensus. Its network services include Solidity-based smart contracts, as well as native tokenization and consensus services used to build decentralized applications.
$HBAR has a market cap of $1.89 billion with an FDV of $3.03 billion HBAR is trading at $0.06.
$HBAR has 56.89% unlocked. 1273,353,491 HBAR worth $77.3 million (2.5% of total supply) is going to be unlocked on the 1st of June, 2023.
6. Optimism (OP)
Optimism ($OP) is a layer-two blockchain on Ethereum. Optimism benefits from the security of Ethereum and helps scale the Ethereum ecosystem by using optimistic rollups, meaning transactions are trustlessly recorded on Optimism but ultimately secured on Ethereum.
Optimism has 69.12% of its token locked. OP has a market cap of $681.8 million and an FDV of $9.2 billion trading at $2.16.
154,618,822.65 which is 3.6% of the total supply of Optimism worth $335.5 million is going to be unlocked on the 31st May, 2023.
7. SandBox (SAND)
The Sandbox is a virtual Metaverse built on the Ethereum blockchain, where players can build, own, and monetize their gaming experience.
With an FDV of $1.72 billion and a market cap of $1.05 billion $SAND is trading at $0.57. The Sandbox is set to unlock 332,548,054 SAND tokens (11.1% of total supply) worth $191.1 million on the 14th of August, 2023.
8. Arbitrum (ARB)
Arbitrum is an Ethereum layer-two (L2) scaling solution that uses optimistic rollups to achieve its goal of improving speed, scalability and cost-efficiency on Ethereum.
$ARB is trading at $1.4 with a market cap of $1.78 billion and an FDV of $13.9 billion.
Arbitrum will unlock 1,111,750,000 ARB, 11.1% of the total supply worth $1.5 billion on 23rd March 2024.
9. Apecoin (APE)
ApeCoin is an ERC-20 governance and utility token used within the APE Ecosystem to empower and incentivize a decentralized community building at the forefront of web3
$APE has a market cap of $1.45 billion with an FDV of $4.02 billion trading at $4.
ApeCoin is set to release 15,601,325 (1.6% of total supply) worth $62.8 million on the 17th of May 2023.
10. BitDAO (BIT)
BitDAO is one of the world’s largest Decentralized Autonomous Organizations. Their vision is open finance and a decentralized tokenized economy. BitDAO is an organization governed by $BIT token holders.
$BIT is trading at $0.49 with a market cap of $919.1 million with an FDV of $4.98 billion.
BitDAO is set to unlock 187,499,999.36 $BIT (2% of total supply) worth $93.4 million on May 15th, 2023.
Trading and Navigating Token Unlocks
Although token unlocks increases the supply of a token which increases the possibility of downward price action this also depends on the willingness of the recipients of the unlocked tokens to sell.
If the recipient Hodl there won’t be any significant impact on the price of the token, in short, it is possible for a token to rally during unlocks.
Now shorting unlocks is a strategy where traders open short positions before the token unlocks to profit from falling prices.
Investors who want to get in on a project can also take advantage of the opportunity and buy at a cheaper price if the price falls during unlocks.
It is important to look at the size of the unlock i.e. how big is the amount of the tokens to be unlocked compared to the circulating supply of the tokens and its daily trading volume.
You can also research the price action of a token the last time there was an unlock to see the impact it had on the price with the notion that market conditions might not be the same but just to have an idea to make more informed decisions.
Closing Thoughts
To trade unlocks and crypto in general it is important to have a broad crypto experience, strong analytical skills and practical knowledge of futures and spot trading.
Token unlocks are key events for the cryptocurrency market, as they can impact the price direction of various digital assets. Although widely considered bearish events it is paramount to DYOR as each token and their unlocks are mutually exclusive events with different factors and peculiarities therefore different outcomes
With the highly speculative and volatile nature of the crypto market it is important to stay vigilant and up-to-date on the latest developments in crypto space.
Also Read: 8 Tokens To Watch Out For in 2023
[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]
Featured Image Credit: ChainDebrief
This article was written by Godwin Okhaifo and edited by Yusoff Kim
