If you follow the crypto market closely, you are probably familiar with the concept of token unlocking. This process is a move to prevent early investors or project team members from flooding the market with big sales. Accordingly, it involves the gradual release of previously frozen cryptocurrencies.
Token unlock and crypto value
Unlocking tokens has a significant impact on liquidity. It is also often perceived as a bearish trend. However, some experts argue that they only highlight current market trends. On the other hand, it is also important that the subject is included in a research. Because research also provides us with clear information. In this context, a recent study reveals important results.
There is a recent study by analytics firm The Tie. Accordingly, the average drop in coin prices occurs prior to the unlock event. Surprisingly, prices are experiencing a rapid rebound when the liquidity released exceeds 100% of the average daily volume. But in the two weeks following the unlocking, there is a deeper decline. The study examined more than 350,000 unique unlock events involving over 100 different tokens.
No immediate sale
Lawrence Lewitinn, director of content at The Tie, points to this fact in Wednesday’s newsletter. “When unlocking represented more than 100% of the average daily volume, prices tended to recover faster, albeit for a short period of time. This may be attributed to investors feeling relieved that the unlock did not immediately flood the market with new tokens.” says.
However, the research also uncovered an interesting pattern. Within two weeks of unlocking, token prices fell below their initial levels at the time of unlocking. This indicates that token holders may prefer to wait a few days before selling their tokens to the market.
Transaction volumes
Tie’s study also shows a notable increase in transaction volumes for coins that have experienced significant unlocks. This highlights the significant impact of token unlocking on market activity and investor behavior.
cryptocoin.com When we look at it as a whole, the unlocking of tokens plays an important role in shaping the dynamics of the crypto market. While freeing up liquidity, its effects on prices are more nuanced than initially perceived. Investors are experiencing temporary relief from an unlocked market. However, a deeper correction usually occurs afterward.
