Original Title: From Locked to Liquidity: What 16,000+ Token Unlocks Teach Us
Original author: Keyrock
Compiled by Lawrence, Mars Financial
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 unlock would lead to a significant price drop (2.4x) and increased volatility
Team unlocking will trigger the most severe collapse (-25%) and irrational dumping
Investors unlocking demonstrate a controllable price performance, as they adopt wiser strategies to reduce the impact of unlocking on the market.
Unlocking ecosystem development is one of the few factors with a positive impact (average +1.18%).
Introduction
Unlocked tokens worth over $600 million (equivalent to Curve Market Cap) are released every week and typically flow into the hands of different participants within a predetermined time interval. The scale and interval of these unlocks, the expected and actual release 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-seeking behavior, the rhythm and structure of Token unlocking are crucial for ensuring long-term value acquisition and improving holder satisfaction. Unlocking is not a novel concept. In the TradFi field, mechanisms such as equity vesting have been used to incentivize employees to maintain consistency in the long term. However, in Block chain projects, the methods, frequency, and impact of Token unlocking vary greatly.
In the analysis of 16,000 unlock events in this article, a striking pattern emerged: unlocks of all types, sizes, and recipients almost always have a negative impact on prices.
This article adopts 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 recurring patterns and key behavioral differences in the entire ecosystem.
Understanding Unlock
As a trader, you cannot perceive the overall decisions of retail investors to buy or sell, but you can access information about another group of holders, those listed 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 table 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 the unlocking process is a tricky task for any project. You can’t simply pre-gift all Tokens because recipients may leave and sell them. But you also can’t make them wait too long, or they may think the project is not worth it. The project must strike a balance: incentivizing recipients to stay in the initial 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 continues until all allocations are made. For most encryption projects, these are outlined in the early stages of 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, followed by linear unlocking in the remaining time.
This method is effective because it can ensure that the recipient makes the 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. Slow unlocking can alleviate market pressure.
Not all unlocks follow this structure. Some are called “batch unlocks”, releasing all Tokens at the end of Cliffs. Others are purely linear, allocating Tokens regularly from the beginning of Cliffs, until fully allocated.
Key factors for unlocking scale and price dynamics
This article begins by breaking down the vesting period for 16,000 composite events and classifying each event by size. For each event, the daily token price is tracked for the first 30 days and 30 days after unlocking. In addition, the “median” price and volatility indicator for each token in the month prior to the 30-day pre-vesting period are tracked. This is crucial because many projects have a monthly unlocking plan. This method isn’t perfect, but it allows for better isolation of smaller unlocks.
Finally, no asset can exist independently of the market. This is especially true for AltCoins, which often exhibit extreme beta correlation with their protocol Tokens. To illustrate this point, this article standardized the price changes in each unlocked data series.
To simplify, this article selects ETH as the Benchmark, and then weights the prices in the sample (before, during, and after the unlocking event) with ETH to derive a more market-independent index.
The scale of unlocking does not represent everything
After decomposing, classifying, and quantifying unlocking events, the average price impact of different time intervals after plotting the unlocking date. When visualized, the data looks messy. You may expect a proportional relationship between unlocking scale and price impact, but the correlation weakens after more than 7 days.
When scaled by relative magnitude, most unlocks appear to have similar degrees of price suppression. Instead, frequency is a more explanatory factor. As mentioned earlier, unlocks typically occur either in a single large batch after the initial Cliff, or continuously before the vesting period ends. For any unlocks other than large or massive ones, we also observe smaller, steady downward price pressure from the continuous unlocks. Therefore, it’s difficult to distinguish the quality of unlock magnitude.
Cliffs and the Gulf of Linearity
The clearer data in the middle is the behavioral characteristics of a large-scale unlocking before the event occurs. In the 30 days before the event, it is usually seen that the price continues to fall and accelerates in the last week. After unlocking, the price often stabilizes and returns to a neutral level within about 14 days.
This price behavior may be attributed to two main phenomena:
Complex Hedging: Large unlockings are typically allocated to market maker Hedging recipients. 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 the scale. If executed properly, this strategy can effectively minimize the impact of unlocking on the market.
Retail investor anticipation: The sharp decline in the last week may be due to retail investors pushing down prices in advance. They are aware of the upcoming unlock and sell tokens to avoid dilution, without realizing that the recipients of the unlock may have already completed dumping through hedging.
This behavioral pattern is also very evident in the weighted volume of different categories, usually peaking at 28 or 14 days before unlocking.
Interestingly, the data shows that the performance of large unlocks (> 10% of 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 hedge due to the large scale of the unlocks and it is not possible to dump or unload within 30 days. Therefore, their market effects are often more gradual and lasting.
The last chart focuses on the Fluctuation of changes. A large unlock will cause significant Fluctuation on the first day. However, this Fluctuation will basically dissipate within 14 days.
How to trade?
In most cases, the key is to follow the large and massive unlocks on the calendar. These are usually the starting Cliffs to transition to linear unlocking. For any given unlock, the proportion granted by Cliffs may vary widely, ranging from 10% to 50%. What really matters is how much the unlock accounts for the total supply.
Data shows that the best time to enter after a major unlock is 14 days later, when 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 pre-reactions often begin.
For smaller unlocks, it’s usually best to wait until they’re completed.
Receiver type, a key predictive factor 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 widely, but 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 a one-time payment or as a salary.
Unlocking Ecosystem Development: Injecting the ecosystem to fund activities such as Liquidity, network security, or grants.
Public / Community Unlock: Distribute Tokens to the public through Airdrop, user rewards, or stake incentives.
Burn Unlock: Tokens used only for burning to reduce supply. These are rare and therefore not included in this analysis.
There are different opinions on which type of recipient has the greatest price impact downstream. Some believe that most of the community Airdrops are carried out by Sybil attackers, so the market is filled with dumping pressure. Others believe that injecting millions of Tokens into the ecosystem will dilute the value. Some also believe that VC and investors are the fastest dumpers, and they will profit.
After analyzing thousands of unlocking events, the data shows:
Almost all categories show a negative price impact, but there are subtle differences.
The development of the ecosystem unlocks with the least destructive effect, while team unlocking always leads to the largest decline in price.
Investors and the public / community unlocking have a moderate impact on the price.
However, just like the unlocking scale, these numbers themselves do not tell the whole story. When you plot PA by recipient type within 30 days before and after the unlocking event, different behaviors emerge.
What drives the behavior of the recipient?
At first glance, team unlocking is the most destructive, while ecosystem unlocking poses almost no threat. But these are only superficial insights. Why the difference? What drives the behavior of the recipients? What lessons can protocol learn from this data?
Team Unlock
Team unlocking is one of the most unfavorable categories for price stability. You should be careful when the team is about to reach cliffs or is in the middle of allocation.
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.
Uncoordinated dumping by team members:
Teams are usually composed of multiple participants, each with different financial goals and no coordinated way to settle their Tokens.
Many team members view their tokens as compensation for long-term (sometimes years) work before receiving proper rewards. When these tokens unlock, especially near Cliffs, the incentive to 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-scale Token allocations
In addition, pre-hedging strategies can reduce the direct pressure on the market at the time of unlock over time.
So these explain why the price is so negative, but why is there also a price drop observed in the past 30 days? This is largely due to a severe price impact combined with overlapping linear unlocks. Why try to control the median price before observation, because many unlocks are continuous, and the data still shows suppression. In this regard, if you make every effort, you need not only to skip batch Cliffs unlocks, but also to postpone purchases during the linear unlocking period.
Unlocking Ecosystem Development
In terms of ecosystem development, we see a unique trend: a slight decrease in price in the 30 days prior to unlocking, followed by an immediate positive price impact after unlocking. Unlike other unlocking types, ecosystem development unlocking typically guides tokens towards creating long-term value and strengthening the protocol.
Why does the price rise (and often pump) after unlocking?
Liquidity supply: Tokens are often allocated to lending platforms or Liquidity pools to increase market Depth, reduce Slippage, and enhance overall Token availability. By enhancing ‘market availability’, these unlocks can not only stabilize trading conditions, but also enhance participants’ confidence.
Incentives for Participation: Ecosystem funds typically drive user participation through incentive programs. These initiatives, such as Liquidity Mining or stake rewards, generate a flywheel effect of participation, thereby promoting network activity. As participants recognize the potential for continued rise, they are unlikely to sell immediately but 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 realize, they indicate 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 for this behavior.
Expected dumping: As mentioned earlier, many investors engage in pre-unlocking dumping, believing that increasing Token supply will dilute value, regardless of the purpose of unlocking. This is particularly common among retail investor participants, whose misunderstandings of unlocking types can drive short-term decisions.
Liquidity Preparation: A large number of recipients receiving donations or distributions usually require advance preparation of Liquidity. For example, in order to establish a Liquidity pool on a DEX, recipients may sell existing assets to ensure stablecoins 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 unlocks usually exhibit controlled price performance, and data from 106 unlock events shows a consistent trend: slow, minimal price drops. This stability is not accidental. Early investors (whether angel or C round) typically have a VC background and professional knowledge of managing positions.
These investors are not just transferring risks; they are actively avoiding potential market disruptions while optimizing returns. By understanding the complex strategies they adopt, traders can predict how these events will unfold and adjust their positions accordingly.
OTC Trading Backstage: Investors often hire Liquidity providers or OTC Trading desks to sell large amounts of Tokens directly to interested buyers. This method completely bypasses the public order book, avoids immediate pressure from the seller, and prevents signaling to the market.
T/VWAP and Hedging: Time-Weighted Average Price (TWAP) execution or Trading Volume-Weighted Average Price (VWAP) strategy helps to diversify Token sales over time, thus dropping price impact. Many investors also use futures to pre-Hedging their positions to ‘lock in’ prices before unlocking events. They then gradually unwind these positions after unlocking to further drop volatility.
“Locking” or “Hedging” is actually opening short positions with Derivatives before the unlocking date, which helps to ensure the price as early as possible when unlocking the short positions during Token sale.
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 collateral for loans, play a critical role in shaping market dynamics, providing informed traders with a clearer perspective to interpret Token activities.
Community and public unlocking
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 event. 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 programs. Thoughtful design can prevent unnecessary market chaos while achieving the expected goals of promoting community development and participation.
Summary
Token unlocking is an essential mechanism in the encryption ecosystem to fund development, incentivize participation, and reward contributors. However, their intervals, scale, and recipient categories are key factors in determining their price impact. Understanding what these impacts are and why they occur can help to make better trades and assist protocols in building their unlocking mechanisms better.
This article emphasizes key trends in the analysis of over 16,000 unlocking events for 40 Tokens.
In terms of reducing the short-term disruptive effect of price, linear unlocking is better than the original Cliffs unlocking, although larger Cliffs usually recover better after 30 days.
The most important price changes often come not from Token recipients, but from the retail investor’s reaction to narratives and broader emotions.
Receiver Category Dynamics
Ecosystem unlocking: sustained positive results, driven by Liquidity provision, user incentives, and infrastructure financing to promote rise.
Investor Unlock: Minimal interference due to complex strategies such as OTC sales, TWAP/VWAP execution, and Options hedging.
Team Unlock: The most disruptive category, poor coordination and immature dumping methods have led to a significant price decline. The team can mitigate the impact by collaborating with market makers.
Community unlock: Long-term impact is limited, as many recipients hold Token, but in the short term, Miners tend to sell Token for immediate gains.
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 they play a crucial role in Token performance.
Contrary to popular belief, VC and investor unlocking is not the main factor for price decline. These participants typically align with the long-term goals of the protocol and adopt strategies that limit market chaos and maximize returns. On the other hand, team unlocking requires closer follow as poorly managed allocations often result in downward pressure on Token prices. Ecosystem unlocking provides a unique
