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Market Dynamics Around Token Unlocks

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Token unlocks are more than just scheduled events; they are critical market drivers. Whether causing price suppression, volatility, or ecosystem growth, their impact is undeniable. Keyrock, a cryptocurrency market maker, published a report on token unlocks and how these events affect the market.

The research highlights that token unlocks, though predictable, have significant impacts. Leveraging insights from the study enables crypto market participants to navigate these events more effectively, transforming potential disruptions into opportunities.

Keyrock Research Unveils Insights on Token Unlocks

The study examined more than 16,000 token unlocks, shedding light on the substantial effects these events have on market behavior. The findings of the research provide valuable insights for traders and investors alike. Every week, over $600 million worth of tokens enter circulation due to unlocks. Despite their frequency, the market reaction to these events is almost uniform.

“Understanding unlock schedules is no longer optional for traders. It’s essential for timing market entries and exits effectively,” the research highlighted.

According to Keyrock, 90% of unlocks create negative price pressure. This is true regardless of the size, type, or recipient of the tokens. Interestingly, price impacts often begin well before the unlock date, likely as community members front-run the event. Bigger unlocks amplify this effect, causing sharper price drops (up to 2.4 times greater) and increased volatility.

Of note is that token unlock events typically follow structured schedules outlined in vesting tables. These schedules can range from single large releases (cliffs unlocks) to continuous monthly distributions (linear unlocks). Keyrock’s research categorizes these events by size, establishing that smaller unlocks, while less impactful individually, can create cumulative price suppression.

  • Nano (<0.1%) and Micro Unlocks (0.1%-0.5%): Minimal impact.
  • Small (0.5%-1%) and Medium Unlocks (1%-5%): Capable of influencing market sentiment.
  • Large (5%-10%) and Huge Unlocks (>10%): Significant events with high market impact.

For traders, the size of an unlock determines its importance. Huge token unlocks, though initially disruptive, often spread their effects over time, leading to a more gradual price recovery.

Besides size, the type of recipient receiving the unlocked tokens also significantly influences price dynamics. Assessing the unlock recipient’s profile is crucial for determining the potential market impact.  Keyrock has identified five primary categories in this context.

Team Unlocks

These are the most detrimental, leading to average price drops of up to 25%. Uncoordinated selling by team members, coupled with a lack of strategic measures to minimize market impact, exacerbates the situation. Often treated as compensation, these tokens are sold quickly to address financial needs, resulting in sharp price declines.

“Team unlocks exemplify how lack of planning can amplify market disruption,” the report noted.

Therefore, traders should avoid entering positions during these unlock periods or even during the linear distribution that often follows.

Investor Unlocks

Managed strategically and exhibited controlled impacts due to advanced hedging and liquidation strategies. Interestingly, investor unlocks exhibit more controlled price behavior compared to team unlocks.

Early investors, often from venture capital (VC) backgrounds, employ advanced strategies such as OTC deals, derivatives, and options to mitigate the impact of token sales. These methods reduce immediate sell-side pressure and ensure orderly market conditions.

Keyrock’s research points out, that the adoption of similar strategies by project teams could significantly reduce the negative impacts of token unlocks.

“Sophistication in planning and execution can turn unlocks into opportunities rather than liabilities,” Keyrock added.

Ecosystem Development Unlocks

Uniquely positive, these often result in price increases (+1.18% on average) as they inject liquidity or incentivize ecosystem growth. The tokens typically serve for infrastructure development, contributing to long-term ecosystem growth.

Keyrock cites the example of Optimism (OP), which strategically allocated $36 million in tokens to 24 projects following a major unlock in June 2022. This approach not only stabilized the market but also drove network expansion.

“Unlocks aligned with ecosystem growth strategies can act as catalysts rather than disruptors,” Keyrock said.

Optimism Price vs. Time. Source: Keyrock Research on Token Unlocks
Optimism Price vs. Time. Source: Keyrock Research on Token Unlocks

Community or public unlocks often exhibit mixed impacts, with many tokens held or sold by recipients, reflecting moderate price pressures. On the other hand, burn unlocks are rare and, therefore, excluded from the analysis.

Key Takeaways: Patterns and Strategies Around Unlocks

Meanwhile, two phenomena frequently drive pre-token unlock price suppression. First, is retail anticipation, where traders sell early to avoid dilution, further driving down prices. Second, is institutional hedging, where sophisticated holders preemptively lock in prices, minimizing their impact on unlock days.

Post-unlock, prices often stabilize within two weeks as market dynamics adjust. For ecosystem development unlocks, the stabilization is coupled with tangible growth benefits, as seen in projects like Optimism, which effectively used token unlocks to fund ecosystem expansion.

“Optimism’s strategy following its aggressive June 2022 unlock offers a textbook example of how ecosystem unlocks, when well-designed, can drive both immediate utility and long-term growth. Despite an initial selloff, Optimism demonstrated how aligning unlocks with targeted incentives can transform a supply shock into a springboard for expansion,” an excerpt from the research stated.

eyrock’s research highlights the importance of monitoring unlock schedules and understanding recipient behavior. For traders, timing is crucial. Exiting positions 30 days before major unlocks and re-entering 14 days later can reduce risks and maximize returns. For projects, carefully planned unlock schedules and strategies, such as phased releases and liquidity support, can minimize market disruptions and align with long-term growth objectives.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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VanEck Sets Stage for BNB ETF with Official Trust Filing

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Global investment management firm VanEck has officially registered a statutory trust in Delaware for Binance’s BNB (BNB) exchange-traded fund (ETF). 

This move marks the first attempt to launch a spot BNB ETF in the United States. It could potentially open new avenues for institutional and retail investors to gain exposure to the asset through a regulated investment vehicle.

VanEck Moves Forward with BNB ETF 

The trust was registered on March 31 under the name “VanEck BNB ETF” with filing number 10148820. It was recorded on Delaware’s official state website.

VanEck BNB ETF Filing
VanEck BNB ETF Filing. Source: State of Delaware Official Website

The proposed BNB ETF would track the price of BNB. It is the native cryptocurrency of the BNB Chain ecosystem, developed by the cryptocurrency exchange Binance.

As per the latest data, BNB ranks as the fifth-largest cryptocurrency by market capitalization at $87.1 billion. Despite its significant market position, both BNB’s price and the broader cryptocurrency market have faced some challenges recently.

Over the past month, the altcoin’s value has declined 2.2%. At the time of writing, BNB was trading at $598. This represented a 1.7% dip in the last 24 hours, according to data from BeInCrypto. 

BNB Price Performance
BNB Price Performance. Source: BeInCrypto

While the trust filing hasn’t yet led to a price uptick, the community remains optimistic about the prospects of BNB, especially with this new development.

“Send BNB to the moon now,” an analyst posted on X (formerly Twitter).

The filing comes just weeks after VanEck made a similar move for Avalanche (AVAX). On March 10, VanEck registered a trust for an AVAX-focused ETF. 

This was quickly followed by the filing of an S-1 registration statement with the US Securities and Exchange Commission (SEC). Given this precedent, a similar S-1 filing for a BNB ETF could follow soon.

“A big step toward bringing BNB to US institutional investors!” another analyst wrote.

Meanwhile, the industry has seen an influx of crypto fund applications at the SEC following the election of a pro-crypto administration. In fact, a recent survey revealed that 71% of ETF investors are bullish on crypto and plan to increase their allocations to cryptocurrency ETFs in the next 12 months. 

“Three-quarters of allocators expect to increase their investment in cryptocurrency-focused ETFs over the next 12 months, with demand highest in Asia (80%), and the US (76%), in contrast to Europe (59%),” the survey revealed.

This growing interest in crypto ETFs could drive further demand for assets like BNB, making the VanEck BNB ETF a potentially significant product in the market.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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XRP Recovery Stalls—Are Bears Still In Control?

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XRP price started a fresh decline from the $2.20 zone. The price is now consolidating and might face hurdles near the $2.120 level.

  • XRP price started a fresh decline after it failed to clear the $2.20 resistance zone.
  • The price is now trading below $2.150 and the 100-hourly Simple Moving Average.
  • There is a connecting bearish trend line forming with resistance at $2.120 on the hourly chart of the XRP/USD pair (data source from Kraken).
  • The pair might extend losses if it fails to clear the $2.20 resistance zone.

XRP Price Faces Rejection

XRP price failed to continue higher above the $2.20 resistance zone and reacted to the downside, like Bitcoin and Ethereum. The price declined below the $2.150 and $2.120 levels.

The bears were able to push the price below the 50% Fib retracement level of the recovery wave from the $2.023 swing low to the $2.199 high. There is also a connecting bearish trend line forming with resistance at $2.120 on the hourly chart of the XRP/USD pair.

The price is now trading below $2.150 and the 100-hourly Simple Moving Average. However, the bulls are now active near the $2.10 support level. They are protecting the 61.8% Fib retracement level of the recovery wave from the $2.023 swing low to the $2.199 high.

XRP Price

On the upside, the price might face resistance near the $2.120 level and the trend line zone. The first major resistance is near the $2.150 level. The next resistance is $2.20. A clear move above the $2.20 resistance might send the price toward the $2.240 resistance. Any more gains might send the price toward the $2.2650 resistance or even $2.2880 in the near term. The next major hurdle for the bulls might be $2.320.

Another Decline?

If XRP fails to clear the $2.150 resistance zone, it could start another decline. Initial support on the downside is near the $2.10 level. The next major support is near the $2.0650 level.

If there is a downside break and a close below the $2.0650 level, the price might continue to decline toward the $2.020 support. The next major support sits near the $2.00 zone.

Technical Indicators

Hourly MACD – The MACD for XRP/USD is now gaining pace in the bearish zone.

Hourly RSI (Relative Strength Index) – The RSI for XRP/USD is now below the 50 level.

Major Support Levels – $2.10 and $2.050.

Major Resistance Levels – $2.120 and $2.20.



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Experts Raise Red Flags Over Finances

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Circle’s initial public offering (IPO) filing has raised concerns among industry experts, who are sounding alarms over the company’s financial health, distribution costs, and valuation. 

While the move marks a significant step toward mainstream financial integration, experts’ skepticism casts doubt on the company’s long-term prospects.

Analysts Highlight Red Flags With Circle IPO

On April 1, BeInCrypto reported that Circle had filed for an IPO. The company plans to list its Class A common stock on the New York Stock Exchange (NYSE) under “CRCL.”

Circle’s IPO filing reveals revenue of $1.67 billion in 2024, a notable increase from previous years. However, a closer examination of the company’s financials has uncovered some challenges.

Matthew Sigel, Head of Digital Assets Research at VanEck, noted that revenue increased 16% year over year. Yet, at the same time, the company reported a 29% decrease in EBITDA year over year, indicating a decline in operational profitability. Additionally, net income fell by 42%, reflecting a significant drop in overall profitability.

Circle Financial Data
Circle Financial Data. Source: X/MatthewSigel

Sigel pointed out four factors contributing to the decline in these financial metrics. He explained that the company’s rapid expansion and new service integrations negatively impacted net income. 

Furthermore, the discontinuation of services like Circle Yield reduced other revenue streams. This, in turn, exacerbated the decline in profitability. 

“Costs related to restructuring, legal settlements, and acquisition-related expenses also played a role in the decline in EBITDA and net income, despite overall revenue growth,” Sigel added.

Importantly, he focused on Circle’s increased distribution and transaction costs. Sigel revealed that the cost rose due to higher fees paid to partners like Coinbase and Binance.

A related post by Farside Investors on X (formerly Twitter) shed further light on these expenses.

“In 2024, the company spent over $1 billion on “distribution and transaction costs,” probably much higher than Tether as a % of revenue,” the post read.

This prompts speculation that Circle may be overspending to maintain its market share in the competitive stablecoin sector. The company’s historical performance further fuels skepticism.

Farside Investors added that in 2022, Circle recorded a staggering $720 million loss. Notably, the year was marked by significant turmoil in the crypto industry, including the high-profile collapses of FTX and Three Arrows Capital (3AC). 

This suggests that Circle may be vulnerable to market shocks. Thus, it calls into question the company’s risk management capabilities—especially in the inherently volatile crypto market.

“The gross creation and redemption numbers are a lot higher than we would have thought for USDC. Gross creations in a year are many multiples higher than the outstanding balance,” Farside Investors remarked.

In addition, analyst Omar expressed doubts about Circle’s $5 billion valuation. 

“Nothing to love in the Circle IPO filing and no idea how it prices at $5 billion,” he questioned.

He drew attention to several concerns, including the company’s gross margins being severely impacted by high distribution costs. The analyst also pointed out that the deregulation of the US market is poised to disrupt Circle’s position. 

Additionally, Omar stressed that Circle spends over $250 million annually on compensation and another $140 million on general and administrative costs, raising questions about its financial efficiency. He also noted that interest rates—core income drivers for Circle—will likely decline, presenting additional challenges.

“32x ’24 earnings for a business that just lost its mini-monopoly and facing several headwinds is expensive when growth structurally challenged,” Omar said.

Analysis of Circle's Finances Ahead of IPO
Analysis of Circle’s Valuation Ahead of IPO. Source: X/Omar

Ultimately, the analyst concluded that the IPO filing was a desperate attempt to secure liquidity before facing serious market difficulties.

Meanwhile, Wyatt Lonergan, General Partner at VanEck, shared his predictions for Circle’s IPO, outlining four potential scenarios. In the base case, he forecasted that Circle would capitalize on the stablecoin narrative and secure key partnerships to drive growth. 

In a bear case, Lonergan speculated that poor market conditions might lead to a Coinbase buyout.

“Circle IPOs, the market continues to tank, Circle stock goes with it. Poor business fundamentals cited. Coinbase swoops in to buy at a discount to the IPO price. USDC is all theirs at long last. Coinbase acquires Circle for something close to the IPO price, and they never go public,” Lonergan claimed.

Lastly, he outlined a probable scenario where Ripple bids up Circle’s valuation to a staggering $15 to $20 billion and acquires the company.

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.



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