Token unlocks can free up liquidity and are widely considered bearish, though some observers say they only accentuate the existing market trend, according to new research by analytics firm The Tie. The firm conducted a study of over 350,000 unique unlock events involving more than 100 tokens and found that coins, on average, declined in the lead-up to the event. However, when the liquidity freed up represented more than 100% of the average daily volume, prices quickly recovered, only to fall deeper within two weeks following the unlock.
In cases where the unlock represented more than 100% of the average daily volume, prices tended to rebound faster, albeit for a brief period, said Lawrence Lewitinn, the director of content at The Tie. Nonetheless, within two weeks, prices of tokens facing such significant unlocks fell below their initial levels at the time of the unlock. This may suggest that holders preferred to wait a few days before selling into the market.
The Tie’s research also showed an exponential increase in trading volumes in coins that saw large unlocks.