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As the crypto market continues to rally, a new class of traders is emerging, hoping to capitalize on the volatility caused by large-scale token unlocks. But what exactly are these unlocks, and how can traders track and trade them effectively?
A few weeks ago, Messari published an in-depth report titled "Don't Look Down: Navigating Markets Around Cliff Unlocks," which examines the impact of increased circulating supply on the market. This article highlights the key points of the report and provides additional background information and recommendations for tracking unlock events.
What are token cliff unlocks?
A token cliff unlock is an event where a large amount of tokens, usually locked by early investors, employees, or advisors, are suddenly released into the market. This can have a significant impact on the token's price, especially if the tokens are being unlocked in proportion to the circulating supply. For example, if a project has 100 million tokens in circulation and 25 million tokens are being unlocked, this would be considered a 25% increase in the circulating supply.
Most token unlocks are less than 2.5% of the circulating supply, with unlocks of at least 5% of the circulating supply accounting for less than half of all events (see above). Tokens rarely trade in isolation; their prices are influenced by market sentiment, new product launches, and narrative changes. Although token unlocks typically have a negative impact on a token's price relative to BTC, this is not always the certain patterns are worth noting:
- Unlocks of at least 5% of the circulating supply tend to have a significant impact on token performance.
- Poor token performance typically occurs within seven days before and after unlock events.
- New product launches, strong industry performance, and other catalysts may override typical behavior around unlock dates.
- Highly anticipated large-scale unlocks can trigger unexpected market reactions.
- In the long term, tokens with larger monthly unlock amounts struggle to outperform other altcoins.
How to track token cliff unlocks
There are several ways to track upcoming token cliff unlocks. One popular method is to use the Messari dashboard, which provides a comprehensive list of upcoming unlocks. Another option is to use a service like Token Unlocks or DefiLlama, which aggregates data from various sources and presents it in an easily digestible format.
On Messari, the most significant upcoming unlocks include the following:
- $ONDO: 268% increase in supply over 3 months
- $OMNI: 154% increase in supply over 7 months
- $PRCL: 121% increase in supply over 7 months
- $JITO: 108% increase in supply over 2.5 months
- $TNSR: 96% increase in supply over 7 months
- $TIA: 83% increase in supply over 1.5 months
- $PYTH: 58% increase in supply over 8 months
- $PORTAL: 15.7% increase in supply over 2 weeks
- $MAV: 14.5% increase in supply over 3 weeks
- $ZETA: 11% increase in supply over 2 weeks
This data is supplemented by Defillama, which shows the following:
- $BIGTIME: 61% increase in supply over 3 weeks
- $CYBER: 69% increase in supply over 1 month
- $HOLD: 38% increase in supply over 2 months
- $LVL: 19% increase in supply over 3 months
- $BB: 100% increase in supply over 7 months
Another important metric to track is the daily token issuance and interest rate changes. In this regard, Messari proves to be very useful, with its daily linear interest rate change percentage being the highest.
Significant events that will exacerbate inflation include the following:
- $TIA will begin releasing in 1.5 months
- $JITO will increase daily release amount by 8 times in 3 months
- $DYM's daily release amount will increase by 3.8 times in 4.5 months
Notable events that will reduce inflation include the following:
- $UNI will stop new releases this week, similar to $RON and $XVS (next week)
- $WOO plans to reduce release amount by 75% in 1.5 months
- $NEAR will reduce release amount by 38% in 1 month
According to data from Token Unlocks, the first week of November will see the highest new issuance amount, with $1.4 billion entering the market.
Tips for trading token cliff unlocks
Here are a few tips for trading token cliff unlocks effectively:
- Consider the overall market conditions and upcoming events. A bear market or an upcoming product launch may significantly alter how an unlock
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