Token unlocks ‘almost always negative for price,’ Keyrock’s study reveals

Keyrock’s study reveals that weekly token unlocks result in price declines of 90%; shows that larger events cause more severe crashes, with team unlocks triggering crashes of up to 25%.

Prices often take a big hit when tokens are unlocked. In fact, data compiled by market maker Keyrock reveals that nearly 90% of unlock events result in price declines. Analysis of more than 16,000 token unlocks reveals that weekly unlocks result in $600 million worth of new tokens entering the market, a significant factor in price fluctuations.

“A striking pattern emerged across the 16,000 unlock events we analyzed: the price of unlocks across all types, sizes and buyers is almost always negative. This highlights the importance of tracking unlock schedules and understanding their implications, especially for investors aiming to time the market effectively .”

keyrock

The study suggests that, despite general market conditions, it was the increase in token supply that most triggered these price declines. For example, during a team unlock that releases tokens held by the project team or early investors, the market faces heavy selling pressure as these stakeholders liquidate their holdings.

Median weighted price change | Source: Keyrock

The case of Yuga Labs’ Apecoin (APE) illustrates this trend. One team lock began releasing 0.7% of the total supply ($11 million worth) each month. Analysts noted that over seven months, the price of the APE token fell 77%, much more than the 9% decline in Ethereum (ETH).

“We know this because on-chain data shows that the team is depositing funds into Market Maker OTC accounts. Knowing that this was an impending vesting lock that would continue for some time could have helped better inform a trade to delay the potential for the Ape Acquisition at that time.”

keyrock

Keyrock notes that investors’ unlocking transactions tend to have a more controlled effect. These stakeholders often minimize market disruption by using hedging strategies such as over-the-counter sales or options. “VC and investor unlocks are not the main drivers of price declines,” the report says, emphasizing that these participants are aligned with the long-term protocol goals.

Keyrock analysts noted that tying the locks of the ecosystem to growth initiatives can increase liquidity and provide potential opportunities by encouraging adoption. However, the team emphasized that unlocking operations should be done carefully to avoid major price drops.