Key points:
Over $600 million in tokens are unlocked every week.
Regardless of size or type, 90% of unlocks create negative price pressure.
The impact on the token price typically begins 30 days before the unlocking event.
A larger unlock would result in a significant price drop (2.4x) and increased volatility.
Team unlocking triggers the worst crashes (-25%) and irrational selling.
Investors unlocking shows controllable price performance because they adopt smarter strategies that reduce the impact of unlocking on the market.
Ecosystem development unlocks are one of the few factors with a positive impact (+1.18% on average).
Introduction
Over $600 million worth of locked tokens are unlocked every week (equivalent to Curve market cap). These tokens are usually released at predetermined intervals and flow into the hands of different participants. The size and spacing of these unlocks, the expectations and dates, and who obtains these tokens all have an impact on token values and the market.
Source: Keyrock
In a crypto industry dominated by short-term decision-making and rampant profit-making, the pace and structure of token unlocking is critical to ensuring long-term value capture and increasing holder satisfaction. Unlocking is not a novel concept. In the traditional financial industry, mechanisms such as equity vesting have been used to motivate employees to stay consistent over the long term. However, the method, frequency and impact of token unlocking vary widely among blockchain projects.
Among the 16,000 unlock events analyzed in this article, a striking pattern emerged: unlocks of all types, sizes, and recipients almost always had a negative impact on price.
This article takes a trader-centric approach and examines some of the most prominent token unlocks of the past few years and analyzes how unlocks of different sizes and recipient types affect prices, identifying recurring patterns and key key issues across the ecosystem. behavioral differences.
Understanding Unlocking
As a trader, you don’t have insight into the overall retail buying or selling decisions, but you do have information about another group of holders, those on the vesting table. Unlocking schedules are key to the puzzle, not only do they hint at future supply shocks, but they are leading indicators of sentiment and volatility.
Source: PANews
Most vesting tables look like the one above: a long-term calendar with "Cliffs" and "Linear or batch unlock blocks" marked in the middle. These blocks are assigned to different recipients - categories such as "seed investors", "core contributors" or "community".
Design unlocking is a tricky task for any project. You can't simply give away all your tokens upfront because the recipient might walk away and sell them. But don’t make them wait too long, or they might decide the project isn’t worth it. Programs must strike a balance: motivating recipients to stay in the early stages of a program's development while also keeping them engaged long-term. The solution is often to gradually distribute tokens over a specified vesting period.
Source: PANews
A typical unlock might look like this: The vesting period begins with the relationship between the recipient and the organization and continues until full distribution. As with most crypto projects, these are outlined early in the white paper. There may be no allocations during the first ⅓ ± ¼ of the vesting period. A large number of tokens are then released at once and then unlocked linearly over the remaining time.
This approach works well because it ensures a minimum commitment from the recipient before receiving the reward. For example, developers are incentivized to continue participating, while investors face an initial lock-up period followed by partial cash-out, and a slow unlock can reduce market pressure.
Not all unlocks follow this structure. Some are called "batch unlocks" where all tokens are released at the end of Cliffs. Others are purely linear, starting with no cliffs and distributing tokens periodically until fully distributed.
Unlocking scale: a key element of price dynamics
This article first breaks down the vesting periods of 16,000 composite events and categorizes each event by size. For each event, daily token prices were tracked for 30 days before and 30 days after unlocking. Additionally, “median” price and volatility metrics were tracked for the month prior to each token’s 30-day pre-unlock period. This is crucial since many projects have monthly unlocking plans. This approach isn't perfect, but allows for better isolation of smaller-scale unlocks.
Source: PANews
Finally, no asset can exist independently of the market. This is especially true for altcoins, which often exhibit extreme beta correlations with their protocol tokens. To account for this, this article normalizes the price changes in the data series for each unlock.
Source: PANews
To simplify, this article chooses Ethereum as the benchmark, and then weights the prices in the sample (before, during, and after the unlock event) with Ethereum to derive a more market-independent metric.
Unlocking scale isn’t everything
After decomposing, classifying and quantifying the unlocking events, the average price impact for different time intervals after the unlocking date is plotted. When visualizing, the data looks messy. You might expect a proportional relationship between unlock size and price impact, but beyond 7 days the correlation weakens.
Source: Keyrock
When scaled to relative size, most unlocks look similar in the degree of price suppression they result in. Instead, frequency is the more telling factor. As mentioned previously, unlocking typically occurs in a single large batch after the initial Cliff, or continuously until the end of the vesting period. Sustained downward price pressure for smaller, stable unlocks is also observed for any unlock other than large or mega unlocks. Therefore, it's hard to discern a good or bad unlock size.
Cliffs and the linear divide
Source: Keyrock
What is clearer in the data is the behavioral signature of larger-scale unlocks before the event. It is common to see a sustained decline in prices in the 30 days leading up to an event, with the decline accelerating in the final week. Once unlocked, prices tend to stabilize back to neutral levels within about 14 days.
This price behavior can be attributed to two main phenomena:
Complex Hedging: Large unlocks are typically allocated to recipients who use market maker hedging. By locking in price or taking advantage of volatility before unlocking, these parties reduce token pressure and mitigate the immediate impact of the unlock. Most companies start hedging 1–2 weeks or even a month in advance depending on size. If executed correctly, this strategy can effectively minimize the impact of unlocking on the market.
Retail investors anticipate ahead of time: The sharp decline in the last week may be due to retail investors pushing prices down in advance. They know the unlock is coming, so they sell tokens to avoid dilution, often without realizing that the recipient of the unlock may have already completed the sell-off via hedging.
This pattern of behavior is also evident in weighted trading volumes across different categories, which typically peak 28 or 14 days before unlocking.
Interestingly, the data shows that huge unlocks (>10% of supply) perform as well or better than large unlocks (5%–10%). This may be because the unlock is too large to fully hedge and cannot be sold or unwinded within 30 days. As a result, their market effects tend to be more gradual and long-lasting.
Source: Keyrock
The last chart highlights changes in volatility. Large unlocks can cause significant volatility on the first day. However, this volatility largely subsided within 14 days.
How to trade?
Most of the time, the key is to keep an eye on the calendar for the mega and mega unlocks. These are usually the starting cliffs that transition into linear unlocking. The percentage Cliffs are awarded for any given unlock can vary widely, from 10% to 50%. What really matters is how much is unlocked relative to the total supply.
Data shows that the best time to enter after a major unlock is 14 days later, when volatility has stabilized and hedges may have been unwound. For exits, the best time is 30 days before a major unlock, when hedging or market pre-reactions tend to begin.
For smaller unlocks, it's usually best to wait until they're complete.
Recipient type, key predictor of price impact
The second and most important thing to consider when analyzing unlocks is the receiver type. Who are the recipients of the tokens and what does this mean for price action? Recipients can vary widely, but generally fall into five main categories:
Investor Unlock: Tokens allocated to early investors as compensation for funding projects
Team Unlocks: Tokens reserved to reward the core team, either through a one-time payment or as salary
Ecosystem Development Unlock: Inject into the ecosystem to fund activities such as liquidity, cybersecurity, or grants.
Public/Community Unlocking: Distribute tokens to the public through airdrops, user rewards, or staking incentives.
Burn Unlock: Only tokens for burning, reducing supply. These are rare and therefore not included in this analysis
Opinions vary as to which recipient type has the greatest impact on downstream prices. Some believe that community airdrops were mostly conducted by Sybil attackers, and as a result, the market was flooded with selling pressure. Others believe that injecting millions of tokens into the ecosystem will dilute value. Others believe that VCs and investors are the quickest to sell and will profit.
Source: Keyrock
After analyzing thousands of unlock events, the data shows:
Almost all categories show negative price effects, but there are subtle differences —
Ecosystem development unlocks are the least disruptive, while team unlocks always result in the largest price drops.
Investors and public/community unlocking have moderate impact on price
However, as with unlock size, these figures alone don't tell the whole story. Different behavior emerges when you plot the price action by recipient type in the 30 days before and after the unlock event.
Source: Keyrock
What drives the receiver's behavior?
At first glance the team unlocks appear to be the most damaging, while the ecosystem unlocks pose little threat. But these are only superficial insights. Why is there a difference? What drives the recipient's behavior? What lessons can protocols learn from this data?
Team Unlock
Team unlocks are one of the categories with the worst price stability. You should be cautious when the team is about to reach the Cliffs or is in the middle of an allocation.
When charted, Impact Token prices follow a roughly linear downward trend, starting 30 days before the unlock date and continuing to decline at a severe angle. Team unlocks tend to have two characteristics that impact price more than other receiving categories.
Source: Keyrock
Uncoordinated selling by team members:
Teams often consist of multiple participants with different financial goals and no coordinated approach to liquidating their tokens.
Many team members view their tokens as compensation for long-term (sometimes years) labor before being properly paid. When these tokens are unlocked, especially close to the Cliffs, the incentive to profit is understandably high —
Even with linear unlocks, these tokens are usually part of their revenue and need to be sold
Lack of hedging or mitigation strategies:
Unlike large investors or institutions, the team rarely uses complex techniques to reduce market impact when selling.
Experienced entities often recruit market makers to strategically manage large token allocations
In addition, pre-hedging strategies can reduce the immediate pressure on the market when unlocking over time.
So these explain why the price is so negative, but why is the price drop also observed in the first 30 days? Much of this is likely a combination of severe price implications and overlapping linear unlocks. Why try to control for the median price before looking at it, since many unlocks are consecutive and the data still shows that there is suppression. In that regard, if you try your best, not only skip bulk Cliffs unlocks, but defer purchases for the linear period of the unlocks.
Ecosystem development unlocked
In terms of ecosystem development, a unique trend is seen: a slight price decrease in the 30 days before unlocking, followed by a positive price impact immediately after unlocking. Unlike other unlock types, ecosystem development unlocks typically direct tokens toward initiatives that create long-term value and strengthen the protocol.
Source: Keyrock
Why prices rebound (and often rise) after unlocking:
Liquidity Supply: Tokens are often allocated to lending platforms or liquidity pools, thereby increasing market depth, reducing slippage, and increasing overall token availability. By enhancing "market availability," these unlocks not only stabilize trading conditions but also increase participant confidence.
Participation incentives: Ecosystem funds usually promote user participation through incentive programs. These initiatives, such as liquidity mining or staking rewards, create a flywheel effect of participation that drives activity on the network. As participants realize the potential for continued growth, they are less likely to sell immediately, choosing instead to continue investing in the ecosystem.
Grants and Infrastructure Funding: Developer grants and infrastructure project funding support the creation of dApps and network scalable functionality. While returns on these investments typically take 6-12 months to materialize, they demonstrate a long-term commitment to ecosystem growth, mitigating short-term selling pressure.
How to explain the pre-unlock price drop? There are two reasons for this behavior:
Anticipated selling: As mentioned previously, many investors sold ahead of the unlock, believing that increasing the token supply would dilute the value regardless of the purpose of the unlock. This is especially common among retail players, where misunderstandings about unlock types drive short-term decisions.
Liquidity preparation: Large recipients of grants or allocations often need to prepare liquidity in advance. For example, to build a liquidity pool on a DEX, recipients might sell existing assets to secure stablecoins or other matching assets. This preparatory selling creates downward price pressure even before the token is deployed.
Investor Unlock
Investor unlocks are one of the most predictable events in the token market. Unlike other categories, these unlocks typically exhibit controlled price performance, with data from 106 unlock events showing a consistent trend: slow, minimal price drops. This stability is no accident. Early stage investors (whether angel or Series C) often have a VC background and expertise in managing positions.
These investors are not just transferring risk; they are actively avoiding the potential for market disruption while optimizing returns. By understanding the complex strategies they employ, traders can predict how these events will unfold and adjust their positions accordingly.
Source: Keyrock
OTC backend: Investors often hire liquidity providers or OTC desks to sell large amounts of tokens directly to interested buyers. This method completely bypasses the public order book, avoiding immediate seller pressure and signaling to the market.
T/VWAP and Hedging: Time-weighted average price (TWAP) execution or volume-weighted average price (VWAP) strategies help spread token sales over time, thereby reducing the price impact. Many investors also use futures to pre-hedge their positions to “lock in” prices ahead of an unlocking event. These positions are then gradually unwound as they are unlocked to further reduce volatility.
"Locking" or "hedging" is actually using a derivative financial instrument to open a short position before the unlock date, which helps to guarantee the price early when the short position is unwound when the token is sold.
Since 2021, the use of advanced option strategies has expanded beyond investors, with more and more project teams adopting them to generate recurring revenue or manage funds more efficiently. For traders, this evolution reflects the increasing complexity of the crypto market, unlocking opportunities to predict and align with the strategies of major players. Options, whether sold privately or used as collateral for loans, play a key role in shaping market dynamics, providing informed traders with a clearer lens into which to interpret token activity.
Community and public unlocking
Community and public unlocking, such as airdrops and points-based reward programs, behaviorally reflect investor unlocking, with prices gradually decreasing before and after the event. This dynamic is shaped by two different behaviors between recipients:
Source: Keyrock
Immediate Sell-Off: Many retail participants liquidate their rewards as soon as they are received, prioritizing liquidity.
Long-term holders: Most public airdrops are held rather than sold, reflecting a pool of participating users or less active traders.
While the overall price impact was modest, these results highlight the importance of a well-designed rewards program. Thoughtful design can prevent unnecessary market disruption while achieving the intended goal of promoting community development and engagement.
Summarize
Token unlocking is an essential mechanism in the crypto ecosystem to fund development, incentivize participation, and reward contributors. However, their spacing, size and recipient category are key factors in determining their price impact. Understanding what these effects are and why they occur helps make better transactions and helps protocols better structure their unlocks.
This article’s analysis of over 16,000 unlocking events across 40 coins highlights key trends:
Linear unlocks are better than initial Cliffs unlocks in terms of reducing short-term price disruption, although larger Cliffs generally recover better after 30 days.
The most significant price movements often come not from token recipients, but from retail reactions to narratives and broader sentiment.
Receiver category dynamics
Ecosystem Unlocked: Sustained positive results that drive growth through liquidity provision, user incentives, and infrastructure financing.
Investor Unlocking: Minimal disruption thanks to sophisticated strategies such as OTC sales, TWAP/VWAP execution, and option hedging.
Team Unlocked: The most destructive category, where poor coordination and immature selling methods lead to significant price drops. Teams can mitigate the impact by working with market makers.
Community Unlocking: The long-term impact is limited because many recipients hold the tokens, but short-term “miners” often sell tokens for immediate gains.
in conclusion
Before making long-term trades, be sure to check the unlocking calendar using tools like CryptoRank, Tokonomist, or CoinGecko. Unlock events are often misunderstood, but they play a vital role in a coin's performance.
Contrary to popular belief, VC and investor unlocking is not a major factor in the price decline. These participants are typically aligned with the long-term goals of the protocol, employing strategies that limit market disruption and maximize returns. Conversely, team unlocks require closer attention, as poorly managed allocations can often lead to downward pressure on the token price. Ecosystem unlocking provides a unique opportunity that, when aligned with clear growth goals, often serves as a catalyst for adoption and liquidity, making it a favorable time to enter the market.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: (PANews)
Original author: Keyrock
“How does token unlocking affect price? 90% will bring selling pressure, but this type of unlocking has a positive impact." This article was first published in "Crypto City"