As the market faces rising volatility, investors are preparing for a big month, with multiple projects set to initiate their token releases. This rise in token supply could lead to a temporary decline in the value of leading altcoins such as DYDX, 1INCH, and Aptos, among others.
Over $800 Million To Hit The Altcoin Market
Approximately $830 million in vested digital assets are set for release into the markets in December. The largest release will come from the decentralized exchange dYdX, which is set to unlock 150 million tokens reserved for investors, founders, and employees. With the current market values, these tokens are valued at nearly $500 million.
Lookonchain’s recent tweet indicates that on December 1st, 2023, Dydx will release 150 million tokens. Of this, $280.35 million worth of tokens will be accessible to investors. Additionally, other altcoins such as Immutable X (IMX), 1INCH, Hedera (HBAR), and Sui (SUI) are also preparing for their upcoming rounds of token unlocks in the following days.
Token unlock events result in an increased supply of the asset, as coins previously held in a vesting period, including those for early investors, are released. Such significant unlockings often cause price drops, as the surge in supply exceeds the demand from investors, as revealed by a study conducted earlier this year by the crypto analytics firm The Tie.
On December 1, the decentralized finance protocol 1inch Network is set to release approximately 98 million 1INCH tokens, currently valued at around $33 million. Also, the proof-of-stake blockchain project Aptos is preparing for a substantial token release in December. Apecoin will unlock $25 million worth of tokens on 17 December.
Data indicates that Aptos will unlock nearly 25 million tokens, worth close to $180 million, on December 12. Additionally, Hedera is scheduled to release HBAR tokens valued at $11 million on December 1, while Sui will unlock tokens worth $41 million on December 3.
Bearish Reaction On Altcoin Prices
Several major altcoins, including the native tokens of platforms like dYdX (DYDX), Optimism (OP), and Sui (SUI), experienced a decline due to token unlocks. However, it is to be noted that during the last token unlock of DYDX on 31st October 2023, the expected negative impact did not intensify.
Token unlock safeguards the project against immediate sell-offs. However, it also results in a steady influx of new supply into the market. In case of major unlock events, there might be a solid downward pressure. When the increase in supply follows normal selling behaviors (such as liquidating positions before or after unlocks), it’s not uncommon to see price decline further.
Certainly, not every token with unlocks is sent to decline in value. It’s advised to conduct thorough research on the project’s fundamentals and its community before investing. However, for traders focusing on short-term strategies, being aware of the unlock schedule can be beneficial in strategically planning entry and exit points.