Key Points
Keyrock, a market maker, has conducted an analysis of token unlocks and their impact on prices. The study examined over 16,000 token unlock events. It found that the majority of these events, around 90%, led to a decline in prices. The study suggests that this is due to a surge in token supply following the unlock.
Unlocks and Price Drops
The analysis revealed an interesting pattern. Regardless of the type, size, or recipient of the unlock, it was almost always negative for the price. This was true even when taking into account the overall market conditions. This finding underscores the importance of tracking unlock schedules and understanding their implications, especially for traders looking to time the market effectively.
The study highlighted the impact of team unlocks. These are events where tokens held by the project’s team or early investors are released. These events often lead to heavy selling pressure as these stakeholders liquidate their holdings. This, in turn, triggers a price drop.
An example of this is the case of Apecoin’s (APE) from Yuga Labs. A team unlock event started releasing 0.7% of the total supply each month, worth $11 million. Over a period of seven months, the price of the APE token dropped by 77%. This was significantly more than the 9% decline in Ethereum (ETH) during the same period.
Investor unlocks, on the other hand, tend to have a more controlled impact on the market. These stakeholders often use hedging strategies such as over-the-counter sales or options. This minimizes market disruption. The report noted that “VC and investor unlocks are not the primary drivers of price declines”. These participants often align with long-term protocol goals.
Keyrock’s analysts suggested that tying ecosystem unlocks to growth initiatives can boost liquidity and drive adoption. However, they also emphasized the need for careful handling of team unlocks to prevent major price declines.
