Best Places to Check Token Unlocks so you Don’t Get Dumped On
Hey folks, before reading this article, I highly recommend that you check out my previous article entitled “Why you should pay attention to a token’s FDV” because as I'll get into detail a bit later, massive token unlocks may significantly dilute your token’s value, getting you rekt in the process. But let’s start with the basics first.
What are token unlocks?
Typically when tokens are “unlocked” it means that they are made available for public use, meaning that the owner is able to sell or swap that token if they wish to do so. With many tokens, there is usually a “vesting” schedule where a team members, employees and/or investors will get a certain amount of tokens released to them over a certain period(s) of time. What’s very important to pay attention to is if there’s a cliff (as opposed to a graduated) vesting schedule, because as the name implies, there’s one significant release where most (if not all) of the tokens are released at one time, creating a cliff like structure in the total token supply. Take one of the top marketcap coins, $AVAX for instance:
You’ll notice above that instead of seeing a smooth curve upwards, there are several small cliffs — each one representing a token unlock date that extends all the way out until January 2028. Depending on how much you helped fund or build the project, tokens can be distributed in many different amounts and ways.
Getting Dumped on
Tracking token unlock dates are particularly important to retail investors because when a significant portion of the token’s supply is being released all at once, there might be an incredible amount of sell pressure that will impact the token’s price negatively. In other words, if you decided to buy a token a day ahead of a token’s unlock date, your token might be worth only a fraction of the price afterwards. Let’s take the smaller marketcap move-to-earn altcoin $SWEAT for instance:
One of the token unlock dates for $SWEAT was on December 12, 2022, and just a week later, the price of the token fell from $0.014 to around $0.01, equating to almost a 30% drop. In other words, had someone sold some $SWEAT a week after the unlock, they would have gotten only 70% of what they could had if they frontrun the massive unlock selloff the week before.
Even without huge sell pressure, if half of a token’s circulating supply is unlocked in one day, essentially the price of your token will be significantly diluted. Therefore it’s important to keep track of a token’s circulating supply and its FDV — if there’s a low total circulating supply and a high FDV, this is a strong indicator that there’s probably a lot of unlocks in the future.
How do I find out when token unlocks will occur?
There are several different resources that you can access that have aggregated data on many if not all token vesting schedules. In no particular order we have:
TokenUnlocks — in chronological order will tell you which tokens have unlocks coming up, starting with the soonest first. TokenUnlocks allows you to create notifications for specific tokens, and allows you to easily compare a token’s FDV, max supply, market cap, and circulating supply.
Unlocks Calendar — a substack that you can subscribe to for free, or upgrade to get more detailed information about upcoming unlocks including initial VC entry prices
Vestlab — similar to TokenUnlocks, will give you a chronological list of upcoming unlocks starting with the soonest first. One feature I really like about Vestlab is that they have a calendar view with all the ticker names:
$ETH Unlock & the Shanghai Upgrade
Slated to occur towards the end of Q1 2023, Ethereum will most likely undergo its Shanghai Upgrade which will finally allow $ETH stakers to make withdrawals. Although this really isn’t a vesting unlock per se, once/if the upgrade is completed, it may create a similar sell off as some stakers have not had access to their staked $ETH for years.
Will $ETH dump? The majority of stakers locked up their $ETH at a higher price than it is today, so once the $ETH gets unlocked, it’s hard to imagine that most people would sell their $ETH at a loss:
That being said, I imagine that there is going to be a run-up on price on the days leading up to the unlock event, and then perhaps a dump, at least as big as we saw once the Merge was completed back in September.
Conclusion
Just because there’s a huge release schedule for a given token, it doesn’t necessarily mean that there will be a permanent effect on price. Market prices are subject to a great deal of many factors, only one of them being their vesting schedule. In addition, it’s important to consider whether or not releases are already priced in. Arguably Ethereum’s Merge and Bitcoin’s past halving cycles were already priced in, but incidentally immediate price action for both dropped.
If you take anything away from this article, I’m only suggesting that the vesting/unlock schedule be one of the many factors that you consider before buying any tokens, as ill timing could make a significant difference in how much you might profit or lose.
Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates.
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!
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