Analyst on why Celestia could face 20% correction

Celestia could face potential selling pressure by the end of October due to the massive token unlock event, CEX.IO Chief Analyst Illia Otychenko told crypto.news.

On October 30, 175 million Celestia (TIA) tokens, accounting for 16.4% of the total supply, will enter the circulating supply as the modular blockchain turns one year old. The value of these coins is around $1 billion at current price levels.

Otychenko pointed out three important points that could trigger a bearish trend in TIA price in the upcoming token unlock event:

Early unlock: The network launched only a year ago, and this is the first major unlock since the initial launch. Additionally, the October 30 release marks the beginning of subsequent monthly unlocks. Historically, tokens that distribute less than 70% of their total supply tend to have greater volatility during unlock events, according to the 6MV report. Major unlock: TIA will nearly double its circulating supply in a single event, as its circulating supply will increase by 82%; this will extend well beyond the 1% threshold where negative price impact typically begins to emerge. Profit-taking opportunity: Approximately 67% of the tokens in the upcoming unlock will go to seed and series A and B investors, who are currently making profits of 59,400% and 1,800% respectively.

“With TIA underperforming in 2024,” down 70% from its all-time high of $20.9 in February, “these early investors may be tempted to sell,” says CEX.IO chief analyst.

According to Otychenko’s analysis, activity on the Celestia network has increased significantly this year while fees have fallen. This indicates declining revenue and short-term pressure on the TIA token, but in the long run “this dynamic could be a positive signal.”

Moreover, the analyst explains that TIA may face a short squeeze due to the massive token unlock event and potential profit-taking from early investors.

“If Celestia does not see an increase in positive activity after the token is unlocked or a broader altcoin rally does not occur to support the asset, the TIA token could face a price decline in excess of 20% upon launch.”

Otychenko told crypto.news:

On September 23, Celestia Foundation announced a $100 million funding round led by Bain Capital Crypto. This helped TIA price rise 14% in less than 24 hours as the positive sentiment surrounding the asset increased significantly.

TIA price – October 14 | Source: crypto.news

TIA is up 3.4% in the last 24 hours and is trading at $6.12 at the time of writing. Its market capitalization currently stands at $1.33 billion and its daily trading volume is $227 million.