Crypto markets are poised for a significant supply shock this January, with expectations of approximately $7.2 billion in crypto token unlocks. This considerable amount is set to impact market dynamics and investor sentiment as various projects release locked tokens into circulation.
Why does it matter?
Token unlocks are crucial processes in the cryptocurrency ecosystem, allowing previously locked tokens to become available for trading or use after a specified vesting period. These unlocks can be categorized into two types:
- Cliff Unlocks: Large, one-time releases of tokens.
- Linear Unlocks: Gradual distribution of tokens over a specified time frame.
In January 2025, the crypto market anticipates a mix of these two unlock types, with the first week alone already recording around $1 billion in tokens released. The third week (January 13-19) is projected to account for the largest share, with approximately $4 billion in unlocks scheduled during that period and Aptos, Optimism, and Arbitrum are amongst the more prominent projects to see massive token unlocks.
First one to pay attention to is Aptos (APT) due on January 12.
Aptos plans to release over 11 million APT tokens, valued at about $111.4 million, which represents around 2% of its market cap.
Then there's the Circular Protocol (CIRX) also on January 12. Around 28 billion CIRX tokens, worth about $108.35 million will hit the market, constituting over 62% of its market cap. This is quite huge and will most certainly attribute to price volatility on the downside.
Arbitrum (ARB) is scheduled for January 16 when over 92 million ARB tokens valued at approximately $86 million will hit the market.
Arbitrum, Optimism, Ronin, Movement, UXLINK, Immutable, Jito Labs, and StarkNET are the next eight projects scheduled to unlock significant token values, with respective amounts of (approx) $86.24 million, $67.29 million, $66.89 million, $53.35 million, $36.73 million, $35.59 million, $35.04 million, and $32.66 million.
The anticipated token unlocks could lead to increased selling pressure in the market. Historical data shows us that large token releases often correlate with short-term price drops due to the simple supply-demand dynamics and a potential panic selling among investors. My research points to average price drops of up to 2.4x depending on various factors such as volume, timing and market sentiment.
What to Expect?
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Increased Supply: When tokens are unlocked, they enter circulation, increasing the overall supply. This can lead to downward pressure on prices, particularly if demand does not keep pace with the new supply. Historically, about 90% of token unlocks create negative price pressure due to this increase in circulating supply.
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Market Anticipation: Price impacts often begin weeks prior to the unlock event. Some have already started. The biggest effect is often 2 weeks in advance, but this would vary depending on investors awareness and news about the event. Many traders start selling in anticipation of the unlock, leading to early price declines. This pre-emptive selling can stabilize within two-three weeks after the unlock as the market adjusts.
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Magnitude of Unlocks: Larger unlock events tend to have a more pronounced effect on prices. For instance, significant unlocks can lead to price drops of up to 25%, especially when they involve team allocations where unsophisticated selling occurs.
In this sense, the smaller, more frequent releases usually exert less dramatic downward pressure.
One other important token unlock is the FTX stash of Solana SOL tokens. FTX has recently unlocked 178,631 SOL tokens, which has raised concerns about a potential sell-off in the Solana market. This unlock occurred on October 19, 2024, and is part of a series of regular unlocks where approximately 170,000 SOL tokens are redeemed every 12 to 15 days from FTX's staking address. Looking ahead, the next significant unlock for FTX's SOL holdings is scheduled for March 1, 2025. This event will see a large portion of FTX's locked Solana tokens released, which could further impact market dynamics at that time.
All in all, if you are holding any of these tokens, I would suggest you pay close attention to the price action and act accordingly. For long term holders this may not mean much, but if you're taking advantage of price swings, it would make sense to use these events for swing trading.
☝These are my opinions, not financial advice, always DYOR.
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⚠️ DISCLAIMER ⚠️
The information contained in this article is for informational purposes only. Nothing herein shall be construed to be financial or legal advice. This content reflects solely my own opinion and analysis.
Purchasing cryptocurrencies poses considerable risk of losses. All information is meant for public awareness and contains what is already in the public domain. Always do your own research!
