How to Navigate Token Unlocks
Understanding Token Unlocks
In this video, we will learn about the impact of token unlocks on token prices. We will cover the reasons why tokens are locked in the first place and how to analyze projects and their locking schedules.
Why Tokens Are Locked
- Project teams are allocated a significant amount of tokens at launch, which are locked to align incentives with the community.
- Tokens are locked to prevent investors from dumping their bags immediately.
- Eventually, all locked tokens become unlocked.
Factors Affecting Token Unlocks
Size of Unlock
- If the amount of tokens getting unlocked is large compared to the circulating supply, there will be more sell pressure.
- Example: On October 15th, 2021, Flow started the day worth $18 per token. During that day, 300 million Flow tokens were unlocked, meaning $5 billion of sell pressure. The token dropped to $9.
Liquidity
- An active OTC market can help keep lock token prices closer to public prices.
- Generating market liquidity through positive narratives before an unlock can offset selling pressure.
- These events are called liquidity generation events.
Perpetual Futures
- Private investors can use perpetual futures (perps) to hedge their lock tokens.
- Secondary buyers can hedge their exposure before an unlock.
- Traders can short a token hoping for a market dump after an unlock.
Tokenomics
- Refers to token distribution, utility, lock tokens and emission schedule.
- Projects with many lock tokens and small circulating supply have low float projects with high fully diluted valuations but smaller market caps.
- Projects with few lock tokens and high circulating supply have high flow projects with similar fully diluted valuations and market caps.
- Mission-adjusted revenue can be used to gauge token demand and utility.
Conclusion
By understanding the factors affecting token unlocks, investors can better analyze projects and their locking schedules. This knowledge can help predict when a chart is more likely to go up or down.
Understanding Token Unlock Schedules
In this section, the speaker discusses the importance of understanding token unlock schedules and how to analyze them.
Importance of Token Unlock Schedules
- Token unlock schedules can affect price action.
- Researching and analyzing token unlock schedules can help in making informed investment decisions.
How to Analyze Token Unlock Schedules
- Find the unlock amount dates and token distribution in the project's documents or white paper.
- Use this information to predict potential price movements.
- Conduct further research on the project's fundamentals and market conditions to make informed investment decisions.
Conclusion
The speaker concludes the video by encouraging viewers to like, subscribe, and check out their full written research report.
Final Thoughts
- If you enjoyed the video, give it a like and subscribe for more content.
- Check out the link in the description below for their full written research report.