In 2024, the altcoin market saw a sharp decline as the unlocking of $58 billion worth of tokens put pressure on selling. Supply through token unlocks could potentially trigger a bear market.
Token unlocking could have a significant impact on the value of altcoins such as Avalanche (AVAX), DYDX, and PYTH, which have already fallen significantly.
$85 million worth of tokens unlocked in the last week of June
Since peaking in March, Bitcoin prices have outperformed the altcoin market, which has plummeted nearly 25%. Upcoming unlocks related to digital assets previously allocated to venture capitalists and founders have served as a key catalyst for this downturn.
As the market recovers from the long cryptocurrency winter, early investors are looking to generate profits by selling their holdings.
Read more: What are the best altcoins to invest in June 2024?
Projects are expected to release $85.5 million worth of tokens into the market this week alone. The largest of these is Optimism (OP) , which plans to release 31.34 million OP tokens, worth approximately $56.1 million, on June 30. Currently, only 26% of OP's supply is unlocked.
“If these unlock dates become publicly known, downside price reflexivity may be exacerbated as non-VC holders try to pre-empt the anticipated sale of unlocking VCs,” said Edward Chin, co-founder of Parataxis Capital.
He also points out that this is causing notable activity in the over-the-counter market, where brokers are selling these tokens at steep discounts.
“The current market is strange in that many infrastructure projects funded by investors during bear markets are about to launch tokens, but there are not many regular buyers purchasing these tokens at high prices,” said Rex Sokolin, a tokenomics expert. .
Additionally, a recent CoinGecko study shows the fragility of the market . More than 20% of the top 300 cryptocurrencies still have a significant portion of their tokens locked up.
Read more: Tokenomics Explained: The Economics of Cryptocurrency Tokens
This situation indicates that there is a significant amount of supply scheduled to enter the market in the future. In particular, new cryptocurrencies such as Worldcoin (WLD) and Cheel (CHEEL ) have the lowest liquidity ratios and are likely to be highly volatile.
