Crypto Market Braces for Supply Shock as Billions in Lockups Expire

Cryptocurrencies remain in a downwards correction, with a series of billion-dollar token unlocks potentially hindering any significant recovery. Over the next ten weeks, $2 billion worth of tokens will be unlocked, increasing supply and potentially suppressing prices. Notably, $11 billion in Bitcoin is set to be distributed to creditors of Gemini Earn and Mt. Gox, contributing to the selling pressure. Despite these upcoming supply events, some experts suggest that the FTX repayments could provide some relief, with a potential $3-$5 billion flowing back into the crypto market.

Crypto Market Braces for Supply Shock: Billions in Lockups Set to Expire

The cryptocurrency market remains mired in a corrective phase, but a wave of impending supply events worth billions of dollars is poised to further impede any meaningful recovery.

A recent report by crypto analytics firm 10x Research warns of a "rapid succession of nearly $2 billion of token unlocks during the next ten weeks" that could exert downward pressure on altcoin prices. These token unlocks involve the release of assets that were previously locked up in vesting contracts to team members, organizations, and early investors, including venture capital firms.

Data compiled in the report reveals a substantial lineup of token unlocks over the next two months:

• $97 million of Aptos (APT)
• $79 million of Starkware (STRK)
• $94 million of Arbitrum (ARB)
• $53 million of Immutable X (IMX)
• $330 million of Avalanche (AVAX)
• $64 million of Optimism (OP)
• $28 million of PRIME
• $1 billion of Sui (SUI)
• $48 million of Ethena (ENA)
• $171 million of Altlayer's (ALT)
• $135 million of XAI tokens

"Venture capital investors might be pressured to lock in recent gains, which could cap any upside performance of tokens with positive momentum, especially those where unlocks become available," the report cautions.

The selling pressure is not confined to altcoins alone. Over $11 billion worth of Bitcoin (BTC) will be distributed to creditors of crypto exchange Gemini's Earn program and the long-defunct Mt. Gox crypto marketplace in the coming months.

Velte Lunde, an analyst at K33 Research, warns that "the next months are rigged to see waves of good old crypto FUD," referring to the acronym for "fear, uncertainty, and doubt" that often plagues the market.

Amid the looming supply events, some market observers suggest that the FTX repayments may provide some respite. Pending bankruptcy court approval, an estimated $14-$16 billion in U.S. dollars could be paid out to creditors, with a significant portion potentially flowing back to the crypto market.

Arthur Cheong, founder and chief investment officer of DeFiance Capital, anticipates "at least $3-$5 billion of crypto-native liquidity to be injected back into the market."

However, on Wednesday, the crypto market experienced a downturn as the U.S. day drew to a close. The CoinDesk 20 Index dropped by 3.4% over the past 24 hours, with Bitcoin declining by 2.5% to $61,500 and Ether (ETH) falling by 3.6%. Bitcoin Cash (BCH) and Solana (SOL) were among the worst performers, each shedding over 7%.