From October 2024 to January 2025, tokens worth almost $15 billion will be unlocked, with a third of them coming in the first month of next year. Understanding and analyzing the timing of token releases allows us to predict the price movement of such assets.
The $15 billion figure represents approximately 0.65% of the total crypto market cap, according to CoinGecko as of October 7, 2024. Early investors in crypto projects like Sui, Aptos, Optimism, Arbitrum, Celestia, Worldcoin, and many others will at some point be exposed to previously unavailable assets that could theoretically put pressure on the market in the event of a one-time sale.
Token unlocking is the unblocking of cryptocurrencies previously blocked according to the economic model of the crypto project. These tokens may include assets intended for the project developers, early users and investors.
Since 2017, during the ICO boom, thousands of projects have emerged on the cryptocurrency market, raising millions of dollars to develop and promote their products, blockchain networks, and applications. The influx of new projects and investors into the market has led to increased competition. As a result, there is a need to develop their own rules to improve the quality of the investment process for all market participants.
ICO (Initial Coin Offering) is an analogue of IPO or crowdfunding, only with greater risks, but also with the opportunity to get a large profit, where the tokens sold are an analogue of shares of traditional companies.
In the absence of its own rules and metrics, the crypto market has partially adopted the instruments of stock markets, describing the mechanisms, rules and clear conditions for project teams and investors. The main instrument in terms of raising capital and the project's entry into the open market has become tokenomics, that is, the economic model of the project.
Tokenomics is a set of rules that describe the economic model of a project based on its native token, as well as clear boundaries for the issuance and distribution of tokens among project participants and/or investors.
In the traditional market, these boundaries for the distribution or issue of shares can be determined by the level of economic achievements of the company, financial or production indicators. But in the crypto market, the most popular indicator has proven to be time. For example, for early investors, a vesting period (blocking of tokens) can be set for a period of 1 year or periodic unlocking of tokens can be included, say, once a month for three years.
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Thus, when a project enters the market, the circulating (i.e., marketable) supply of its tokens is often limited. Developers may have one period to unlock their tokens, and investors may have another.
In theory, this practice means that employees, investors, and early adopters are given a certain amount of time to create demand for tokens, so as not to put pressure on the price when trading begins. This is necessary because early participants and investors in the project receive tokens for free or at a significant discount.
For example, the cryptocurrency fund Pantera Capital bought Toncoin in May at 40% below the coin's market price at that time. However, the fund has a one-year vesting restriction on access to tokens, after which the company will be able to withdraw the coins in batches over several years.
Thus, most modern projects have clear vesting periods, i.e. freezing or blocking some part of the assets until certain conditions are met. Usually, the unblocking schedule is initially determined in the project tokenomics and any market participant can see when a particular group of token holders will receive their crypto assets.
Types of unlocks
Depending on the goals and capabilities, project teams choose a convenient token unlocking schedule, which includes two main types: linear and cliff unlocking.
Cliff is the period of time that tokens will be locked after listing on a crypto exchange. Cryptocurrency listing is the process of adding a token or coin to a trading platform.
Linear unlocking - this unlock schedule is a linear unlocking of a certain amount of tokens. This can be a daily, weekly, monthly or other schedule.
Cliff unlocking is a type of unlocking that means that tokens are unlocked in a large "batch" at once.
In reality, projects rarely use just one option and include mixed types of unlocking in the tokenomics, where some participants unlock through a cliff, while others have a linear schedule.
How to track unlocks
The token unlock event is important information for any user or investor because it may impact the price of the token.
Since blockchain technology is an open registry of information with the entire transaction history accessible to anyone from anywhere in the world and at any time, the status of tokens in vesting can be tracked online. This can be done independently, if you have the skills, or with the help of specialized services such as Token Unlock or Cryptorank.
Such platforms allow you not only to monitor the schedule, but also to see who the tokens about to be unlocked are intended for. They also show the dollar value of upcoming unlocks and the percentage of the circulating supply of the project's tokens.