he crypto market shed millions of dollars and consolidated with negative sentiment. However, the end of Q3 2024 presented the market with bullish cues. Following Binance founder CZ’s release, Bitcoin (BTC) climbed to $64K, catalyzing multiple altcoin rallies. On that positive note, the market marches into Uptober—a bullish October when prices typically ramp up.
Among several events on this month’
An Instant Walkthrough: What are Token Unlocks?
Just before you get to understand what token unlocks are, you have to know what and why there is something called token locking or vesting. During the locking or vesting process, the project’s tokens are sealed or locked away from trading/selling for a particular “lock-up period.” This mechanism prevents investors from quickly dumping their tokens, which could negatively impact the project’s value.
While token unlocks is the counter-activity. This event facilitates the release of these previously locked tokens into the market once the lock-up period lifts off. After unlocking, these tokens become tradable or sellable. Notably, there are two kinds of token unlocks prevalent in the market: Cliff and linear.
In a cliff token unlock, tokens are locked and remain inaccessible for a specific period known as the cliff. Once this period ends, a large portion or all of the locked tokens are released at once. Conversely, in a linear unlock, the tokens are gradually released over a set time frame at regular intervals.
How Will Token Unlocks Affect the Market Dynamics?
Token unlocks can significantly impact market dynamics and influence prices. However, this is not a guaranteed outcome, it’s a matter of possibility or probability. Simply put, we could see prices take a dip, lead a rally, or even stabilize for a while.
When tokens are unlocked and investors sell off a large volume, the increased supply can tank the price. On the flip side, if the unlock coincides with positive developments in the project, the token may experience a bullish trajectory. Either way, there will be a change, as an unlock—especially a cliff unlock—disturbs the supply-demand equilibrium.