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Cryptocurrency News Articles
News for TIA of Celestia that grows by 40%: what does it mean for the crypto market?
Sep 27, 2024 at 09:03 pm
The cryptocurrency market continues to amaze, and TIA, the token of the Celestia blockchain, is a clear example of this.
TIA, the native token of the Celestia blockchain, has seen a 40% increase in the last month, outperforming the 13% gain of the CoinDesk 20 index. This growth is surprising as many traders had positioned themselves for a price drop in anticipation of a token unlock worth $1.13 billion next month.
The CoinDesk 20 index tracks the performance of the largest and most liquid cryptocurrencies. While the entire cryptocurrency market has shown signs of recovery, TIA has outperformed expectations.
This is the largest gain for TIA since December 2023. On October 31, 175.74 million TIA tokens, which is 16% of the total supply, will be released.
This massive unlock poses a threat to the cryptocurrency’s price, as the influx of new tokens on the market could cause their value to plummet.
CryptoRank has estimated the value of these tokens at $1.13 billion, which is 82% of TIA's current market capitalization. Unlocks of this magnitude usually put bear pressure on prices, leading many market participants to hedge through perpetual contracts and OTC (over-the-counter) forward agreements.
Many traders are anticipating the October 31st unlock and have positioned themselves as bear traders, expecting the price of TIA to drop once the tokens are released.
Jake Ostovskis, an over-the-counter trader at Wintermute, told CoinDesk that the demand for bear hedges has increased significantly in recent weeks.
This is leading to a scenario where a “short squeeze” could occur. A short squeeze happens when the price of an asset unexpectedly increases, forcing the bear traders to close their positions, which in turn pushes the price even higher.
In this case, TIA has maintained its resilience despite forecasts of a decline, thus leading to a chain effect that has further fueled its growth.
This phenomenon has also been supported by the recovery of financing rates linked to perpetual contracts on TIA. After being negative since July, these rates have returned to zero, indicating an improvement in market prospects for TIA and suggesting that many short bear traders have been “wrong-footed” by the price’s resilience.
Another factor that has likely contributed to the TIA rally is the recent fundraising of $100 million, which was announced this week. This new round of financing brings the liquidity reserve of the Celestia foundation to $155 million, sparking further confidence among investors.
Although the team has not disclosed the details on the use of these funds, some observers have speculated that it was an OTC deal with a valuation of $3.4 billion, selling tokens at $3 each. A third of these tokens will be unlocked on October 31, the same day as the upcoming release of 175.74 million TIA.
Despite the large quantity of tokens arriving on the market, many analysts believe that the unlocking has already been priced in. Ostovskis observed that the market might have anticipated the event, allowing investors to take adequate measures before the unlocking actually occurs.
This has given traders a window of opportunity to adjust their strategies, thus reducing the negative impact that an influx of new tokens could have on the price.
According to Ostovskis, some market participants found the OTC sales to be controversial. However, in the end, the net effect seems to have been positive, allowing the market to absorb the risk more efficiently.
This has led many to believe that the worst is now behind us and that the market has already adapted to the new supply of tokens.
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
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