TL;DR
- Keyrock’s research reveals that 90% of token unlock events create negative price pressure, highlighting the importance of understanding unlock schedules for traders and investors.
- The study found that price impacts often begin before the unlock date, with larger unlocks causing sharper price drops and increased volatility.
- Keyrock suggests that traders exit positions 30 days before major unlocks and re-enter 14 days post-unlock to mitigate risks and optimize profits.
A recent study by Keyrock, a prominent cryptocurrency market maker, has shed light on the significant impact of token unlocks on market prices. The research, which analyzed over 16,000 tokens unlock events, reveals that 90% of these events create negative price pressure, regardless of the size, type, or recipient of the tokens.
This finding underscores the importance of understanding unlock schedules for traders and investors aiming to navigate the volatile crypto market effectively.
Key Findings from the Research
Keyrock’s research highlights that token unlocks, though predictable, have substantial effects on market behavior. Every week, over $600 million worth of tokens enter circulation due to unlocks, causing almost uniform market reactions.
The study found that price impacts often begin well before the unlock date, as community members front-run the event. Larger unlocks amplify this effect, leading to sharper price drops—up to 2.4 times greater—and increased volatility.
The research categorizes token unlocks by size, establishing that smaller unlocks, while less impactful individually, can create cumulative price suppression. The categories include:
- Nano (<0.1%) and Micro Unlocks (0.1%-0.5%): Minimal impact.
- Small (0.5%-1%) and Medium Unlocks (1%-5%): Capable of influencing market sentiment.
- Large (5%-10%) and Huge Unlocks (>10%): Significant events with high market impact.
Types of Token Unlocks
The kind of recipient who obtains the unlocked tokens plays a crucial role in shaping price dynamics. Keyrock identified five primary categories:
- Team Unlocks: These are the most detrimental, leading to average price drops of up to 25%. Uncoordinated selling by team members exacerbates the situation.
- Investor Unlocks: Managed strategically, these exhibit controlled impacts due to advanced hedging and liquidation strategies.
- Ecosystem Development Unlocks: Uniquely positive, these often result in price increases as they inject liquidity or incentivize ecosystem growth.
- Community and Burn Unlocks: These exhibit mixed impacts, with many tokens held or sold by recipients, reflecting moderate price pressures.
Strategies for Traders
To mitigate risks and optimize profits, Keyrock suggests that traders exit positions 30 days before major unlocks and re-enter 14 days post-unlock. This strategy can help reduce exposure to price suppression and volatility associated with token unlock events.
Keyrock’s research provides valuable insights into the market dynamics around token unlocks. By understanding these events and their potential impacts, traders and investors can better navigate the crypto market and transform potential disruptions into opportunities.
