Market

Market Dynamics Around Token Unlocks

Published

4 months ago

December 6, 2024

Coin2049 Newsletter

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

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 Conditions, Privacy Policy, and Disclaimers have been updated.

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Market

XRP Price Reversal Toward $3.5 In The Works With Short And Long-Term Targets Revealed

Published

2 hours ago

April 3, 2025

Coin2049 Newsletter

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Este artículo también está disponible en español.

The XRP price is showing signs of a strong bullish reversal, with a crypto analyst predicting a potential rebound toward $3.5 and even higher. After experiencing significant volatility and undergoing a consolidation due to recent price declines, technical indicators now show support for XRP’s bullish outlook. As a result, the analyst has provided a short—and long-term price target for the cryptocurrency.

XRP Price Projected To Reverse To $3.5

According to ‘Setupsfx’, a crypto analyst on TradingView, XRP is now in a bullish reversal phase, meaning its price is expected to break out of its recent downturn and rise to new highs. Based on the expert’s chart analysis of XRP, the cryptocurrency is predicted to see an explosive increase to $3.5 following the end of its consolidation phase.

Technical Elements Supporting Bullish Reversal

In his chart analysis, Setupsfx highlights XRP’s price action in a 12-hour time frame, showcasing key movements, trends, and technical elements that support his bullish projection. These elements include liquidity and IMB zones, which are areas where price action is expected due to pending orders.

BNB Price Faces More Downside—Can Bulls Step In?

Published

19 hours ago

April 2, 2025

Coin2049 Newsletter

Aayush Jindal, a luminary in the world of financial markets, whose expertise spans over 15 illustrious years in the realms of Forex and cryptocurrency trading. Renowned for his unparalleled proficiency in providing technical analysis, Aayush is a trusted advisor and senior market expert to investors worldwide, guiding them through the intricate landscapes of modern finance with his keen insights and astute chart analysis.

From a young age, Aayush exhibited a natural aptitude for deciphering complex systems and unraveling patterns. Fueled by an insatiable curiosity for understanding market dynamics, he embarked on a journey that would lead him to become one of the foremost authorities in the fields of Forex and crypto trading. With a meticulous eye for detail and an unwavering commitment to excellence, Aayush honed his craft over the years, mastering the art of technical analysis and chart interpretation.
As a software engineer, Aayush harnesses the power of technology to optimize trading strategies and develop innovative solutions for navigating the volatile waters of financial markets. His background in software engineering has equipped him with a unique skill set, enabling him to leverage cutting-edge tools and algorithms to gain a competitive edge in an ever-evolving landscape.

In addition to his roles in finance and technology, Aayush serves as the director of a prestigious IT company, where he spearheads initiatives aimed at driving digital innovation and transformation. Under his visionary leadership, the company has flourished, cementing its position as a leader in the tech industry and paving the way for groundbreaking advancements in software development and IT solutions.

Despite his demanding professional commitments, Aayush is a firm believer in the importance of work-life balance. An avid traveler and adventurer, he finds solace in exploring new destinations, immersing himself in different cultures, and forging lasting memories along the way. Whether he’s trekking through the Himalayas, diving in the azure waters of the Maldives, or experiencing the vibrant energy of bustling metropolises, Aayush embraces every opportunity to broaden his horizons and create unforgettable experiences.

Aayush’s journey to success is marked by a relentless pursuit of excellence and a steadfast commitment to continuous learning and growth. His academic achievements are a testament to his dedication and passion for excellence, having completed his software engineering with honors and excelling in every department.

At his core, Aayush is driven by a profound passion for analyzing markets and uncovering profitable opportunities amidst volatility. Whether he’s poring over price charts, identifying key support and resistance levels, or providing insightful analysis to his clients and followers, Aayush’s unwavering dedication to his craft sets him apart as a true industry leader and a beacon of inspiration to aspiring traders around the globe.

In a world where uncertainty reigns supreme, Aayush Jindal stands as a guiding light, illuminating the path to financial success with his unparalleled expertise, unwavering integrity, and boundless enthusiasm for the markets.

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Market

VanEck Sets Stage for BNB ETF with Official Trust Filing

Published

20 hours ago

April 2, 2025

Coin2049 Newsletter

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. 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. 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.

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