The specific allocation details within the unlocked portion are crucial.
Token unlocks, especially those involving a "massive amount" of tokens released at once, are often seen by the market as a signal of significant selling pressure. Although research reports from analysts aren't overly pessimistic when discussing the negative effects of unlocks, we often lack sufficient "evidence" to substantiate these claims. About half a month ago, the DYDX token underwent a substantial one-time unlock. By observing the market's performance around this event and comparing it with the major unlocks of AVAX and 1INCH, we've drawn some well-supported, though not entirely rigorous, "demonstrated" conclusions.
Before reviewing the market performance, let's state the conclusion upfront: large token unlocks do have a direct impact on the token's price. However, the specific allocation details within the unlocked portion are critical. If a large portion of the unlock is allocated to investment institutions and other "capital providers," a noticeable price drop due to selling pressure is likely post-unlock. Conversely, if a significant share of the unlocked tokens goes to the community and other "user groups," the negative impact tends to be considerably smaller.
Revisiting the Market Performance Around DYDX's Major Unlock in Early December
Back in January 2023, dYdX initially planned to unlock 150 million tokens (worth over $200 million at the time) on February 3 but officially announced a postponement to December 1. Following this news, DYDX surged nearly 25%, and the next day it climbed another 20%, embarking on a rapid upward trend.
The tokens unlocked for DYDX in December accounted for 81.63% of the circulating supply. Out of these, 83.19 million DYDX were allocated to investors, making up 55.5% of the unlocked portion. This means that more than half of the unlocked tokens went to investors.
Subsequent price movements fluctuated along with the broader market trends. After the end of the minor bull run in the first half of the year, the token entered a phase of consolidation within a range.
Originally, the dYdX Chain mainnet was scheduled to launch with a public testnet around late July and the mainnet by the end of September. However, due to progress delays, the testnet was postponed to August–September, and the mainnet launch was pushed to October.
The official launch eventually occurred on October 27. This timeline allowed for a one-month window for token staking and migration afterward. From the project team's perspective, this was likely intended to offset some of the impact of the massive selling pressure.
Let's establish the broader market context: Bitcoin's performance has been strong since October, starting around $27,000 and rising steadily without major pullbacks or other interferences.
We can observe that about one to two weeks before October 27, dYdX found a temporary bottom around $1.80 USDT. It then surged to around $2.30 USDT around the mainnet launch before pulling back to the pre-launch highs.
Entering November, with a full month remaining until the unlock and given the impressive performance of the overall market, DYDX began a sustained upward trend. From $2.20 USDT on November 2, it climbed to $4.36 USDT by November 15—still two weeks away from the unlock date.
What positive developments contributed to DYDX's performance during this period, aside from benefiting from the strong market?
- On October 31, dYdX users gained the ability to bridge DYDX tokens from the Ethereum chain to dYdX Chain (note: transferring back was not supported at the time).
- By November 3, over 60.8 million ethDYDX had been bridged, and the total staked amount exceeded 1 million tokens.
These might seem like minor pieces of positive news, but the influx of market funds was notably strong.
What followed is where the most critical observations lie.
Pre-Unlock Phase
After reaching its peak, the price dipped to around $3 due to the impact of the YFI liquidation on November 19, which sparked community criticism. As the unlock date approached, the price oscillated around the $3 USDT mark. Some profit-taking investors began exiting early.
It's worth mentioning that to prevent another incident like YFI and to improve trading depth and user experience, Chaos Labs partnered with dYdX to introduce a $20 million liquidity incentive program. This initiative aimed to encourage early adoption and ensure a smooth transition to dYdX Chain, lasting approximately six months.
Post-Unlock Phase
A portion of the tokens locked for investors were bridged to dYdX Chain for staking about a week before the unlock. This move drew community dissatisfaction, as some felt that unlocked funds shouldn't be staked ahead of time, competing with retail participants.
On the other hand, since these transferred funds weren't available for deposit on exchanges, the immediate selling pressure was somewhat reduced.
Arthur, the founder of DeFiance Capital and also an investor in dYdX, explicitly tweeted暗示 (hinted) on platform X that the unlock could be bullish.
But was that really the case?
On the day of the unlock, the negative news seemed largely priced in, with a daily drop of only around 5%. Surprisingly, the next day saw a rare surge of 10.56%. However, from that point onward, the token entered a phase of steady decline. At the time of writing, the price stands at $2.80 USDT. Compared to $3.20 USDT on December 1, that's a drop of 14%. If measured from the peak of $4.36 USDT on November 15, the decline is a drastic 55.7%—more than a halving in value.
Let's identify some of the visible sellers (assuming that depositing to an exchange implies intent to sell) based on publicly available information.
- On December 1, an address associated with the DYDX Foundation transferred approximately 5.6 million DYDX tokens (worth about $18.3 million) to Amber Group, which were eventually moved to Binance.
- On December 1, some investors sold 7.5 million DYDX ($23.3 million) through Wintermute and Amber.
- On December 3, three whale addresses deposited 4.08 million DYDX ($13.9 million) to exchanges within 12 hours.
- On December 4, the address starting with 0xb0d, linked to Amber Group, deposited 2.25 million DYDX (around $7.75 million) to Binance. The same day, nearly 800,000 DYDX (about $2.7 million) were also transferred in.
- On December 12, Teneo, the liquidator for Three Arrows Capital, deposited 4.45 million DYDX (worth approximately $12.73 million) to Binance.
Conservatively estimating from publicly recorded sales, at least 28.76 million tokens were sold, resulting in $78.68 million in selling pressure. Based on DYDX's price of $2.75 on December 13, the token had declined by 16.36% since December 1.
In the short term, a large token unlock does indeed bring selling pressure.
Comparing Market Performance Around Major Unlocks of Other Popular Projects
Let's compare with AVAX's recent unlock. On November 24, over 9.55 million tokens (worth about $217 million) were unlocked. Out of these, individual investors received 2.25 million, accounting for only 23.56%—a relatively low proportion.
Looking at AVAX's price chart around that time, the performance was stable before and after the unlock. It even broke through $40 USDT on December 12, reaching a new high since 2022. On November 12, FTX liquidators deposited 916,780 AVAX (approximately $20.7 million) into Binance, which didn't cause significant market impact.
A contrasting example is 1INCH. On December 1, over 98.74 million tokens were unlocked, entirely allocated to the team and venture capitalists (VCs), with zero tokens going to the community.
The result was clear: both before and after the unlock, market selling pressure was evident, and performance was weak. After slowly climbing above $0.42 USDT on December 9, the price turned downward again, falling back to levels seen on the unlock day.
Conclusion
In a favorable market environment, if a large portion of the unlocked tokens is allocated to investors, it can create significant selling pressure in the short term. While the negative impact might not be as catastrophic as some anticipate, it still poses considerable resistance to price appreciation.
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Frequently Asked Questions
What is a token unlock?
A token unlock refers to the release of previously locked or vested tokens into circulation. These tokens often become available to team members, investors, or the community according to a predefined schedule.
Why do token unlocks often cause price drops?
Unlocks can lead to increased selling pressure if recipients decide to sell their tokens immediately upon receiving them. This is especially true for early investors or team members who may have acquired tokens at much lower prices.
How can investors mitigate risks associated with token unlocks?
Investors should research the unlock schedule and allocation details of a project. Understanding whether unlocks are going to investors or the community can provide insights into potential selling pressure. Additionally, monitoring market sentiment and overall crypto market trends is crucial.
Are all token unlocks bad for the price?
Not necessarily. If unlocked tokens are allocated to the community for staking, rewards, or ecosystem development, it can encourage participation and potentially positive price action. The impact depends heavily on who receives the tokens and their likely actions.
What should I look for in a token unlock announcement?
Pay close attention to the size of the unlock relative to the circulating supply, the recipients (investors, team, community), and the overall market conditions at the time of the unlock.
Where can I find reliable information about upcoming token unlocks?
Several cryptocurrency analytics platforms and dedicated websites track token unlock schedules. It's essential to use reputable sources for accurate and timely data. 👉 Access advanced market analysis tools
Upcoming Major Token Unlocks to Watch
- December 12: Aptos unlocked 24.84 million APT (approx. $209 million), representing 8.9% of its circulating supply. Investors received 8.42 million of these tokens, accounting for 33.9% of the unlock.
- December 17: ApeCoin is scheduled to unlock 15.60 million APE (approx. $28.08 million), which is 4.23% of its circulating supply. These are primarily for the founding team.
- December 27: Yield Guild Games (YGG) will unlock 16.69 million tokens. Investors will receive 3.20 million (19.17%), and the community will get 7.01 million (42%).
- December 30: Optimism (OP) will unlock 24.16 million tokens. Investors are allocated 11.41 million (47.23%), and core contributors will receive 12.75 million (52.77%).
Staying informed about these events can help market participants make more informed decisions.