Altcoin
$58 Billion Token Unlock: Altcoin Market Turmoil Explained
The altcoin market suffered dramatically in 2024, with $58 billion in tokens unlocked imposing selling pressure. Supply through token unlocking can potentially kick off a bear market.
Token unlocks could have a profound impact on the value of altcoins such as Avalanche (AVAX), DYDX and Pyth Network (PYTH), which have already seen significant declines.
Unlocking $85 million tokens in the last week of June
From reaching its peak in March, the price of Bitcoin it overshadowed the altcoin market, which fell by nearly 25%. The impending breakouts, involving digital assets previously allocated to venture capitalists and founders, are a primary catalyst for this downturn.
While the market recovers from a long period crypto winterthese early investors want to capitalize by selling their holdings.
To know more: What are the best Altcoins to invest in June 2024?
Total market capitalization of cryptocurrencies excluding Bitcoin and Ethereum. Source: TradingView
Projects will release $85.5 million worth of tokens onto the market this week alone. The largest of these comes from Optimism (OP)that plans to do so publication 31.34 million OP tokens worth approximately $56.10 million as of June 30. Currently, only 26% of OP’s supply is unlocked.
“Given that these unlock days are publicly known, downside price reflexivity may be exacerbated as non-VC holders seek to pre-empt early selling from the VC unlock,” Edward Chin, co-founder of Parataxis Capital She said.
He also notes that this leads to notable activity in the OTC market, where brokers handle sales of these tokens at steep discounts.
“The market is strange right now, as the many infrastructure projects funded by bear market investors are now coming to token launches, but there are not many repeat buyers of these tokens at high prices.” tokenomics said expert Lex Sokolin.
Also, a recent CoinGecko study highlights market vulnerability. It shows that over 20% of the top 300 cryptocurrencies have a large portion of their tokens still locked.
To know more: Tokenomics Explained: The Economics of Cryptocurrency Tokens
This situation indicates substantial imminent supply that may be entering the market. In particular, newer cryptocurrencies such as World Currency (WLD) AND Cheelee (CHEEL) show the lowest flotation ratios, suggesting high potential for volatility.
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