Author: Keyrock
Compiled by Felix, PANews
Key points:
Over $600 million worth of Tokens are unlocked every week.
Regardless of scale or type, 90% of unlocks will generate negative price pressure.
The impact of Token prices usually begins 30 days before the unlocking event.
A larger-scale unlocking would result in a significant price drop (2.4 times) and increased volatility.
Team unlocking will trigger the most severe crash (-25%) and irrational dumping
Investors unlocking demonstrate controlled price performance as they adopt wiser strategies to minimize the impact on the market.
Ecological development unlocking is one of the few factors with a positive impact (average +1.18%)
Introduction
Each week, locked Tokens worth over 6 billion US dollars are unlocked (equivalent to Curve Market Cap). These Tokens are usually released at scheduled intervals, flowing into the hands of different participants. The scale and intervals of these unlocks, as well as the expected and actual dates, and the recipients of these Tokens, all have an impact on the value and market of the Tokens.
In the encryption field dominated by short-term decision-making and rampant profit-taking, the pace and structure of Token unlocking are crucial to ensuring long-term value acquisition and increasing holder satisfaction. Unlocking is not a novel concept. In the TradFi field, mechanisms such as equity vesting have always been used to incentivize employees to maintain consistency in the long term. However, in blockchain projects, the methods, frequency, and impact of Token unlocking vary greatly.
In the analysis of 16,000 unlocking events in this article, an amazing pattern emerged: unlockings of all types, sizes, and recipients almost always have a negative impact on prices.
This article takes a trader-centric approach to study some of the most prominent Token unlocks in the past few years. It analyzes how unlocks of different scales and recipient types affect prices, identifies patterns and key behavioral differences that recur throughout the ecosystem.
Understanding Unlock
As a trader, you cannot discern the overall decision to buy or sell by retail investors, but you can gain insights into another group of holders, namely those on the vesting table. The unlocking schedule is the key to unraveling the mystery, as it not only implies future supply shocks but also serves as a leading indicator of sentiment and fluctuation.
Most vesting tables look like the one above: a long-term calendar with ‘Cliffs’ and ‘Linear or Batch Unlock Blocks’ marked in the middle. These Blocks are designated to different recipients - categories such as ‘Seed Investors’, ‘Core Contributors’, or ‘Community’.
Designing vesting is a tricky task for any project. You can’t simply pre-gift all Tokens because recipients may leave and sell them. But you can’t make them wait too long, or they may think the project is not worth it. The project must strike a balance: incentivize recipients to stay in the early development of the project while also encouraging their long-term participation. The usual solution is to gradually allocate Tokens within the specified vesting period.
A typical vesting may look like: the vesting period starts from the relationship between the recipient and the organization and lasts until all allocations are completed. For most encryption projects, these are outlined early in the White Paper. There may be no allocation in the first ⅓ ± ¼ of the vesting period. Then, a large number of tokens are released at once, and the remaining tokens are unlocked linearly over time.
This method is effective because it ensures that the recipient makes a minimum commitment before receiving the reward. For example, developers are incentivized to continue participating, while investors face an initial lock-up period, followed by partial cash-out and gradual unlocking to alleviate market pressure.
Not all unlocks follow this structure. Some are called ‘batch unlocks’, releasing all Tokens at the end of the Cliffs. Others are purely linear, starting from no Cliffs, periodically allocating Tokens until fully allocated.
Key elements of unlocking scale and price dynamics
This article first decomposes the holding period of 16,000 compound events and categorizes each event by size. For each event, the daily Token price before the unlock and 30 days after the unlock are tracked. In addition, the ‘median’ price and Volatility index of each Token 30 days before the pre-unlock period are tracked. This is crucial because many projects adopt a monthly unlock plan. This method is not perfect, but it can better isolate smaller unlocks.
Finally, no assets can exist independently of the market. This is especially true for alts, which typically exhibit extreme beta correlation with their protocol tokens. To illustrate this point, this article standardizes the price changes in each unlocked data series.
For simplicity, this article chooses ETH as the Benchmark, and then weights the prices in the sample (before, during, and after unlocking events) with ETH to obtain a more market-independent indicator.
Unlocking scale doesn’t mean everything.
After decomposing, classifying, and quantifying unlock events, draw the average price impact at different time intervals after the unlock date. When visualized, the data looks messy. You might expect a proportional relationship between unlock size and price impact, but the correlation weakens after 7 days.
When scaled by relative size, most unlocks seem to have a similar degree of price suppression. Instead, frequency is a more telling factor. As mentioned earlier, unlocks typically occur in the form of a single large batch after the initial cliff, or they continue to occur until the end of the vesting period. For any unlocks other than large or massive ones, a smaller and more stable downward price pressure from ongoing unlocks is also observed. Therefore, it is difficult to distinguish the quality of unlock size.
Cliffs and the Gap Between Linearity
What is clearer in the data is the behavioral characteristics of large-scale unlocking before the event. In the 30 days before the event, the price usually continues to fall and accelerates in the last week. After unlocking, the price often stabilizes within about 14 days and returns to a neutral level.
This price behavior may be attributed to two main phenomena:
Complex Hedging: Large unlockings are typically allocated to market makers who hedge. By locking in prices or utilizing volatility before unlocking, these parties reduce Token pressure and mitigate the direct impact of unlocking. Most companies start hedging 1-2 weeks or even a month in advance based on scale. If executed properly, this strategy can effectively minimize the impact of unlocking on the market.
Retail investors’ early anticipation: The sharp decline in the last week may be due to retail investors artificially suppressing the price in advance. They are aware of the upcoming unlocking, so they sell tokens to avoid dilution, unaware that the recipients of the unlocking may have already completed the dumping through hedging.
This behavior pattern is also apparent in weighted volumes of different categories, typically reaching its peak 28 or 14 days before unlocking.
Interestingly, the data shows that the performance of massive unlocks (> 10% of the supply) is as good as or even better than that of large unlocks (5%-10%). This may be because it is not possible to fully Hedging due to the large scale of the unlock, and it is impossible to dumping or release within 30 days. Therefore, their market effects are often more gradual and lasting.
The last chart focuses on the changes in the Fluctuation. Significant Fluctuation is caused by large unlocks on the first day. However, this Fluctuation essentially fades away within 14 days.
How to trade?
In most cases, the key is to follow the large and super large unlocks on the calendar. These are usually the starting cliffs for transitioning to linear unlocks. The proportion granted by cliffs for any given unlock can vary greatly, ranging from 10% to 50%. What really matters is how much the unlock is relative to the total supply.
The data shows that the best time to enter after a major unlock is 14 days later, when the volatility has stabilized and Hedging may have been lifted. For exiting, the best time is 30 days before a major unlock, when Hedging or market anticipation reactions often begin.
For smaller-scale unlocks, it’s usually best to wait until they are completed.
Recipient type, a key predictor of price impact
When analyzing unlocking, the second and most important is the recipient type. Who is the recipient of the Token, and what does this mean for price behavior? The recipients can vary greatly, but they are generally divided into five main categories:
Investor Unlock: Tokens allocated to early investors as compensation for funding the project
Team Unlock: Tokens reserved for rewarding the core team, whether through lump sum payment or as salary.
Ecosystem Development Unlock: Injecting the ecosystem to fund Liquidity, network security, or donation activities.
Public / community unlock: Distribute Token to the public through Airdrop, user rewards, or stake incentives.
Token Burn & Unlock: Tokens used for burning only to reduce supply. These are rare, so they are not included in this analysis.
Opinions vary on which recipient type has the greatest price impact downstream. Some believe that most of the community Airdrops are carried out by Sybil attackers, resulting in market flooding and dumping pressure. Others believe that injecting millions of Tokens into the ecosystem will dilute their value. There are also those who believe that VC and investors are the fastest dumpers and will profit from it.
After analyzing thousands of unlocking events, the data indicates:
Almost all categories show negative price impact, but there are subtle differences
The development unlocked by the ecosystem has the least destructive impact, while team unlocking always leads to the largest price drop.
Investors and the public/community unlocking have a moderate impact on price.
However, like the unlocking scale, these numbers themselves do not explain the whole situation. When you plot PA by recipient type within 30 days before and after the unlocking event, different behaviors will emerge.
What is the behavior of the driver receiver?
At first glance, team unlocking is the most disruptive, while ecosystem unlocking poses little threat. But these are just surface-level insights. Why is there a difference? What drives the behavior of the recipients? What lessons can protocols learn from this data?
Team Unlock
Team unlocking is one of the most unfavorable categories for price stability. You should be cautious when the team is about to reach Cliffs or is in the middle of distribution.
When drawing charts, the impact on Token prices follows a roughly linear downward trend, starting from 30 days before the unlocking date and continuing to decline at a severe angle. Team unlocks often have two characteristics that can have a greater impact on prices than other recipient categories.
Team members’ uncoordinated dumping:
Teams are usually composed of multiple participants who have different financial goals and do not have a coordinated way to settle their Tokens.
Many team members view their Token as compensation for long-term (sometimes several years) work before receiving proper rewards. When these Tokens unlock, especially near Cliffs, the incentive for profit is high, which is understandable.
Even with linear unlocking, these Tokens are often part of their income and need to be sold
Lack of Hedging or mitigation strategy:
Unlike large investors or institutions, the team rarely uses complex techniques to reduce market impact when selling.
Experienced entities often recruit market makers to strategically manage large Token allocations.
In addition, pre-hedging strategies can reduce the direct pressure on the market caused by unlocking over time.
So these explain why the price is so negative, but why was there also a price drop observed in the previous 30 days? This is largely likely due to a combination of severe price impact and overlapping linear unlocks. Why try to control the median price before observation, because many unlocks are consecutive, and the data still shows suppression. In this regard, if you try your best, not only skip the batch Cliffs unlocks, but also delay the purchase during the linear unlocking period.
Unlocking Ecosystem Development
In the development of the ecosystem, a unique trend has been observed: a slight decrease in price within the first 30 days before unlocking, followed by an immediate positive price impact after unlocking. Unlike other unlocking types, ecosystem development unlocking typically guides Token towards creating long-term value and strengthening the protocol.
Why does the price rise after unlocking (and often pump)?
Liquidity Supply: Tokens are often distributed to lending platforms or Liquidity pools to increase market Depth, reduce Slippage, and improve overall Token availability. By enhancing ‘market availability’, these unlockings can not only stabilize trading conditions but also enhance the confidence of participants.
Incentives: Ecosystem funds typically drive user participation through incentive programs. These measures (such as Liquidity Mining or stake rewards) create a flywheel effect of participation, thereby promoting network activity. As participants realize the potential of continuous rise, they are less likely to sell immediately and instead choose to continue investing in the ecosystem.
Grants and infrastructure funding: Developer grants and infrastructure project funding support the creation of dApps and network scalability. Although the returns on these investments typically take 6-12 months to materialize, they demonstrate a long-term commitment to the ecosystem rise, thereby mitigating short-term selling pressure.
How to explain the price drop before unlocking? There are two reasons that contribute to this behavior.
Anticipated dumping: As mentioned earlier, many investors are dumping in advance before unlocking, believing that increasing Token supply will dilute value, regardless of the purpose of unlocking. This is particularly common among retail investor participants, whose misunderstanding of unlocking types will drive short-term decisions.
Liquidity preparation: a large number of recipients of grants or distributions typically need to prepare Liquidity in advance. For example, to establish a Liquidity pool on a DEX, recipients may sell existing assets to ensure stability coins or other paired assets. This preparatory dumping can even create downward pressure on prices before Token deployment.
Investor unlock
Investor unlocking is one of the most predictable events in the Token market. Unlike other categories, these unlockings typically show controlled price performance, and data from 106 unlocking events reveal a consistent trend: slow, minimal price declines. This stability is not accidental. Early investors (whether angel round or Series C) usually have a VC background and expertise in managing positions.
These investors are not just transferring risk; they are actively avoiding potential market disruptions while optimizing returns. By understanding the complex strategies they employ, traders can predict how these events will unfold and adjust their positions accordingly.
OTC Trading backend: Investors often hire Liquidity providers or OTC Trading desks to sell large amounts of Token directly to interested buyers. This method completely bypasses the public order book, avoids immediate pressure from sellers, and avoids signaling to the market.
T/VWAP and Hedging: Time-Weighted Average Price (TWAP) execution or Trading Volume-Weighted Average Price (VWAP) strategy helps to disperse Token sales over time, thus reducing price impact. Many investors also use futures to hedge their positions in advance to ‘lock in’ the price before the unlocking event. Then gradually unwind these positions after unlocking to further reduce volatility.
Locking or hedging is actually opening short positions using derivatives before the unlocking date, which helps to ensure the price as early as possible when unlocking the shorts position during token sales.
Since 2021, the use of advanced Options strategies has expanded beyond investors, and more and more project teams are adopting them to generate regular income or manage funds more effectively. For traders, this evolution reflects the increasing complexity of the crypto market, unleashing opportunities to make predictions and align strategies with major participants. Options, whether sold privately or used as loan Collateral, play a crucial role in shaping market dynamics, providing informed traders with a clearer perspective to interpret Token activities.
Community and public unlock
Community and public unlocks, such as Airdrop and point-based reward programs, reflect investors’ unlocks in behavior, and prices gradually decrease before and after the activity. This dynamic is shaped by two different behaviors between recipients:
Immediate dumping: Many retail investor participants liquidate their rewards after receiving them, prioritizing Liquidity.
Long-term holder: Most public Airdrops are for holding rather than selling, which reflects a group of participating users or less active traders.
Although the overall price impact is small, these results highlight the importance of well-designed incentive plans. Thoughtful design can prevent unnecessary market turmoil while achieving the expected goals of promoting community development and participation.
Summary
Token unlocking is an essential mechanism in the encryption ecosystem, used to fund development, incentivize participation, and reward contributors. However, their intervals, scale, and recipient categories are key factors determining their price impact. Understanding what these impacts are and why they occur helps to facilitate better trading and assists protocols in building their unlocking mechanisms.
This article emphasizes key trends in the analysis of over 16,000 unlocking events for 40 Tokens.
In terms of reducing price volatility in the short term, linear unlocking is better than the initial Cliffs unlocking, although larger Cliffs generally recover better after 30 days.
The most important price changes often come not from Token receivers, but from the reactions of retail investors to narratives and broader emotions.
Receiver category dynamics
Ecosystem unlocking: sustained positive outcomes, driven by Liquidity provision, user incentives, and infrastructure financing to promote rise.
Investor unlock: minimal interference due to OTC sales, TWAP/VWAP execution, and Options hedging strategies.
Team Unlocked: The most disruptive category, poor coordination and immature dumping methods have led to a significant price drop. The team can mitigate the impact by collaborating with market makers.
Community Unlocking: Limited long-term impact, as many recipients hold Tokens, but short-term Miners usually sell Tokens for immediate returns.
Conclusion
Before engaging in long-term trading, be sure to check the unlocking calendar using tools such as CryptoRank, Tokonomist, or CoinGecko. Unlocking events are often misunderstood but play a crucial role in Token performance.
Contrary to popular belief, VC and investor unlocking are not the primary factors causing price declines. These participants typically align with the long-term goals of the protocol, adopting strategies to limit market chaos and maximize returns. In contrast, team unlocking requires closer attention, as poorly managed distribution often leads to downward pressure on Token prices. Ecosystem unlocking presents a unique opportunity, typically serving as a catalyst for adoption and Liquidity when aligned with clear rise objectives, making it a favorable entry point into the market.
