90% of token unlocks drive prices down, declines begin a month ahead

Team unlocks are the most damaging to a token price, along with small and frequent distributions.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

A recent Keyrock report highlighted that 90% of token unlocks exert negative price pressure, though the effects often take up to 30 days to materialize fully.  

Approximately $600 million of previously locked tokens are regularly circulated. With predetermined schedules, these unlocks flow to teams, investors, and ecosystem funds. 

The report noted the importance of tracking these schedules for traders aiming to time the market effectively.  

Even before tokens are released, unvested investors’ preemptive selling and hedging strategies contribute to downward pressure, with prices typically stabilizing within two weeks of the unlock event.  

While intuition suggests larger unlocks would have a proportionally more significant impact, Keyrock’s data reveals a more nuanced picture.

Events releasing over 5% of the total supply often cause immediate price volatility. However, their effects tend to be gradual and drawn out, as investors can only partially sell or slowly hedge these large volumes.  

Frequent, smaller releases cause consistent downward pressure, though their cumulative impact is less dramatic.  

Interestingly, prices begin declining up to 30 days before the event for most unlock sizes, driven by retail anticipation and sophisticated hedging strategies by institutional players.  

Recipients matter

The recipient category significantly influences price outcomes, as team unlocks presenting itself as the most damaging category. The report suggests teams often lack coordinated selling strategies, leading to severe price declines as individual members liquidate their tokens.

On the other hand, ecosystem unlocks are positive. These token distributions are typically allocated for liquidity provision, user incentives, and infrastructure funding, fostering long-term network growth and stabilizing prices.

Investor unlocks are considered controlled and predictable. Early investors minimize market disruption by leveraging sophisticated strategies like over-the-counter sales and options hedging.  

Opportunities amid the risks

While token unlocks often lead to short-term price suppression, they create opportunities. The report suggests optimal entry points occur 14 days after a significant unlock once volatility has subsided. 

For exits, traders should consider selling 30 days before the event, as prices typically begin declining before the event.