Token unlocking brings short-term volatility, long-term growth. We looked at the data surrounding notable altcoin unlocks to see how they affect the market.
First altcoin Polygon (MATIC)
On October 26, 2019, the Polygon network unlocked 190 million MATICs. Tokens were distributed to private investors and early backers who participated in Polygon’s funding rounds. The price action MATIC has seen in the month and week leading up to the unlock matches the trend seen in most token unlocks. The market was poised to unlock the token, creating a buying pressure that increased the price by almost 30%. After the token airdrop, increasing selling pressure kept the price of MATIC relatively stable. However, in the month following the unlock, the price of MATIC increased by over 80%.
- 30 days before TU: $0.0108
- 7 days before TU: $0.0138
- TU Day 0: $0.0135
- 7 days after TU: $0.0137
- 30 days after TU: $0.0244
Second we look at LidoDAO (LDO)
Lido has grown significantly in popularity in 2022 as Ethereum’s transition to a PoS network has made it its most valuable player. The LDO token saw a notable surge ahead of Merge. That’s why the last month until the December token unlock showed little positive price action. On December 18, 2022, 1.65 million LDO tokens were unlocked and distributed to the project team, investors and validators. The week after the token unlock was the culmination of LDO’s selling pressure, and its price nearly doubled in the month following the unlock.
- 30 days before TU: $1.22
- 7 days before TU: $1.03
- TU Day 0: $0.98
- 7 days after TU: $0.97
- 30 days after TU: $2.01
Next up is the popular metaverse coin Sandbox (SAND).
cryptocoin.comSandbox was among the first major metaverse platforms to hit the market and enjoyed notable success in 2020 and 2021. Sandbox unlocked 397.7 million SAND tokens on August 16, 2021, one year after the high-profile token sale on Binance Launchpool. Tokens were distributed to investors, advisors and company reserves, increasing the liquidity and popularity of the project. SAND followed the same trend as Polygon’s MATIC, where increasing buying pressure drove its price to year-highs before unlocking. A brief price consolidation turned into a positive price action that saw the token gain almost 30% in the month following its unlock.
- 30 days before TU: $0.48
- 7 days before TU: $0.62
- TU Day 0: $0.64
- 7 days after TU: $067
- 30 days after TU: $0.82
The fourth altcoin project 1inch Network (1INCH)
1inch Network peaked in DeFi Summer 2020 and has benefited from the market’s new interest in decentralized finance. Seeking to capitalize on its success, DEX launched its native token 1INCH in late 2020, dedicating approximately 97.5 million tokens to various community initiatives. The altcoin surged in value throughout 2021 as it saw record numbers of users and increased trading volume. 231.7 million tokens allocated to the 1inch team, advisors and outside investors were unlocked on December 1, 2021. This was followed by an even larger unlock, which was distributed to seed investors and the company’s reserves, and another 295.2 million tokens were released.
- 30 days before TU: $4.58
- 7 days before TU: $3.99
- Day 0 of TU: $3.69
- 7 days after TU: $2.72
- 30 days after TU: $2.39
Latest altcoin project STPEPN (GMT)
A pioneer in the Play-to-Move space, STEPN was one of the top performing platforms in the first half of 2022. Native token GMT hit an all-time high in April, with thousands of users flocking to the platform for capital in an attractive reward model. At the beginning of September 2022, a total of 4.2 million GMT tokens were distributed to users as part of the move-to-earn bounty program. The event was followed by the weekly unlocking of approximately 5 million GMT tokens distributed to users.
- 30 days before TU: $0.93
- 7 days before TU: $0.65
- Day 0 of TU: $0.69
- 7 days after TU: $0.73
- 30 days after TU: $0.62
What are the effects of the token unlock event?
Price movements before, during, and after major tokens unlock show a recurring trend. Most tokens are seeing buying pressure build up towards significant planned unlocks followed by a price correction. In most cases, this price correction is short-lived and quickly turns into slow and steady growth for the token. However, some tokens cannot follow this pattern.
The aforementioned trend is most visible in large volumes of tokens, where the unlocking of a token creates a network effect that puts the project on the map and attracts new users. It is also evident in projects that distribute a significant amount of tokens to users. Projects that distribute a large portion of the tokens to private investors and internal teams are projects that have seen their prices drop after major unlocks. Since most of the unlocks are transparent to the public, the market usually expects a big drop and tries to outdo the downward price action.
Some locks also come at an unfortunate time for a token and its holders. For example, STEPN’s GMT reward distribution came after the protocol’s heyday and coincided with a wider decline caused by FTX. There’s also the timing factor. The earlier the unlocking occurs in a project’s life, the greater the impact on the token price. Large-volume, highly liquid projects like Polygon are generally unaffected by unlocks as their large networks quickly absorb any price fluctuations. For most tokens, unlocks provide more liquidity and create a more stable price environment. In the months following the unlock, most tokens are stabilizing their price with significant gains.
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