Skip to main content

Token-Unlock

Concept​

What is Unlocking?​

In the cryptocurrency, "unlocking" typically refers to the process where a specific amount of cryptocurrency transitions from a locked state to a state where it can be freely traded or used, either at a particular time or upon meeting certain conditions. It's rare for cryptocurrencies to be fully tradable upon launch, so most cryptocurrencies in the market have some locked-up tokens. Generally, the project's website will publish the unlocking schedule and the proportion of locked tokens.

Common Unlocking Scenarios:​

  • Presales and ICOs: Tokens purchased during an Initial Coin Offering (ICO) or presale might have a lock-up period. During this period, investors cannot trade or transfer these tokens. Once the lock-up period ends, the tokens are "unlocked," and holders can freely trade them.
  • Founding Teams and Early Investors: To avoid market sell-offs, some projects lock the tokens of founding teams and early investors for a certain period. Unlocking usually occurs in phases, meaning tokens are gradually unlocked over time rather than all at once.
  • Staking and Rewards: In some staking mechanisms, users stake cryptocurrencies to earn rewards. During the staking period, these cryptocurrencies are locked and can only be unlocked and withdrawn after the staking period ends.

Typically, large-scale unlocks occur due to presales, ICOs, or tokens held by founding teams and venture capitalists. These unlock events can significantly impact the token's price.

Impact of Unlocking on Price:​

  • Supply Increase: After unlocking, more tokens can be traded in the market, increasing supply. If demand remains constant or decreases, this could lead to a price drop.
  • Sell Pressure: When a large number of tokens are unlocked, especially those held by early investors or team members, they might choose to sell immediately to realize profits. This increases selling pressure in the market, potentially driving the price down further.
  • Market Expectations: Market participants usually anticipate unlock events and may act accordingly before the unlock. If the price has already dropped before the unlock, there might not be significant price movement afterward, and there could even be a rebound.
  • Unlocking Scale and Frequency: If the number of tokens unlocked is large or the unlocks are frequent, the negative impact on price could be more pronounced. Conversely, if the unlocked amount is small or phased, the impact might be minimal.
  • Market Conditions: The overall market condition (e.g., bull or bear market) also influences the impact of unlocking on price. In a bull market, the negative impact of unlocking might be offset by strong demand, whereas in a bear market, the impact could be more significant.

Unlocking events generally represent a dilution of the existing market capitalization of a token. However, depending on market conditions, demand, and other variables, prices might not always drop, so it cannot be generalized.

Unlock Alerts​

MethodAlgo's T.A.T.A system tracks and monitors the unlocking events of various tokens and notifies traders in advance through alert notifications, allowing traders to analyze and make informed decisions accordingly.

How You Can Use It​

  • Fundamental analysis
  • Avoiding risks
  • Identifying shorting opportunities

Interface​

  • Title: Token Name - Ratio of Unlock Value to Current Market Cap - Countdown to Unlock Event
  • 🔋: Circ. Supply: The total circulating supply, including both unlocked and locked tokens.
  • ⌛️: Unlock Progress: The progress of the token's unlocking.
  • 🔑: Unlocking Amount: The number of tokens being unlocked this time.
  • 💰: Unlocking Value: The value of the tokens being unlocked, along with the ratio of the unlock value to the current market cap.

Alert Parameters​

  • Alerts are sorted in DESC order of the countdown to the unlock event, listing the next 18 tokens scheduled for unlocking. Notifications are sent daily at 8:30 AM (UTC+8) .
  • Typically, the ratio of unlock value to current market cap is less than 100% because most tokens have disabled the mint function at the time of launch, meaning the total token supply is capped. If this ratio exceeds 100%, it indicates additional tokens are being minted.

Usage​

Combine current market strength with fundamental tokenomics analysis to anticipate whether the upcoming unlock could serve as a catalyst for a price decline. It's generally advisable to avoid holding tokens with large unlocks, and consider closing positions ahead of such events.

  • Pay attention to large and extra-large unlocks. If the current market is bearish or in a downtrend, trader may add some short bias.
  • Small unlocks: If the market is in a strong uptrend or bull market, small unlocks might be quickly absorbed by the market, so it may not be necessary to adopt a bearish bias.
  • Sometimes, the impact of unlocking on price may not be immediate due to anticipation. The market might drop before the unlock or experience delayed price movement. Each token is different, and traders must analyze accordingly.
tip

During a phenomenal bull market, the ratio of long to short positions becomes skewed, with long positions significantly outnumbering short positions. As a result, prices may start to stagnate due to insufficient supply (demand outstripping supply). In such cases, the unlocking of tokens, which introduces new supply, can actually help drive prices higher.

Notes​

  • This alert covers tokens with relatively significant market caps and popularity, not just those listed on Binance.
Last updated on