Token unlocks are a pivotal event in the lifecycle of any cryptocurrency project. They represent the moment when previously locked tokens—held by investors, team members, or ecosystem funds—become available for circulation. While seemingly technical, these events can significantly influence market dynamics and investor behavior. Understanding how token unlocks affect price movements is essential for traders, long-term holders, and analysts navigating the volatile crypto landscape.
The Theoretical Impact of Token Unlocks on Price
Increased Supply Often Leads to Price Decline
In theory, when a large volume of tokens is unlocked, the circulating supply increases. Assuming no significant change in market capitalization or demand, this sudden influx dilutes the value per token, often leading to downward price pressure.
Take DYDX, for example. In January 2023, dYdX announced it would delay the unlocking of 150 million tokens—valued at over $200 million—from February 3 to December 1. The market responded positively: DYDX surged nearly 25% immediately after the news, with another 20% gain the following day.
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However, once the unlock occurred on December 2, prices began a steady decline. This was particularly notable because Bitcoin (BTC) was entering a bullish phase due to anticipation around ETF approvals. Despite favorable macro conditions, DYDX underperformed. The unlock released tokens equivalent to 81.63% of total circulating supply, with 55.5% going to investors—a massive supply shock that overwhelmed positive sentiment.
Even the launch of dYdX Chain in early 2024 failed to reverse the downtrend, highlighting how deeply supply-side mechanics can influence price trajectories.
Larger Unlock Ratios Amplify Downward Pressure
The scale of an unlock relative to existing circulation plays a critical role. The larger the percentage of new tokens entering circulation, the greater the potential for price depreciation.
SUI’s unlock in April 2024 illustrates this well. Approximately 1.1 billion SUI tokens were released—nearly matching the existing circulating supply of 1.2 billion. Prior to this, SUI had enjoyed strong upward momentum driven by solid fundamentals and utility within its ecosystem.
Yet, post-unlock, the token gave back most of its gains and entered a prolonged bearish phase lasting about four months. This demonstrates that even projects with robust use cases aren't immune to supply shocks. When unlocks approach or exceed current circulation levels, they act as strong bearish catalysts.
Special Case: Airdrops as Initial Unlocks
Airdrops function as a unique form of token unlock—often representing the first time tokens enter tradable circulation. Because airdropped tokens can equal or surpass initial circulating supply, their release frequently triggers sharp sell-offs.
EigenLayer’s EIGEN token exemplifies this. After months of anticipation as a leader in the restaking space, Eigen officially launched trading in October 2025. Despite high expectations, the token peaked at around $800 million in market cap before dropping to $470 million.
Most of the selling pressure came directly from airdrop recipients—many of whom treated the distribution as profit-taking opportunity rather than long-term investment. This reflects not just supply dynamics but also holder composition: speculative recipients are more likely to sell immediately.
"An airdrop isn’t just distribution—it’s the first real test of community alignment and market valuation."
Investor and Team Allocations Carry Higher Risk
Not all unlocks are created equal. Tokens allocated to investors and founding teams tend to have a more pronounced negative impact when unlocked—especially if those groups hold concentrated positions.
AEVO faced such a scenario in May 2025. Shortly after its token generation event (TGE), reports surfaced that a massive unlock was scheduled for May 15—amounting to seven times the current circulating supply, primarily allocated to early investors and team members.
Market reaction was swift: AEVO broke below key support at $2.86 and plunged to $1.60 within days—a 44% drop. Although the team later clarified that all tokens would be converted from RBN at a 1:1 ratio (alleviating some concerns), the incident underscored how perception of future selling pressure can drive price action even before actual unlocks occur.
Price Impact Often Precedes the Unlock Event
Crucially, much of the price impact happens before the unlock date. Anticipating downward pressure, traders and holders often sell ahead of time or open short positions to hedge risk.
This preemptive behavior creates selling pressure that manifests days—or even weeks—before tokens actually become liquid. Historical patterns across DYDX, ARB, and SUI show similar trends: momentum stalls, volatility rises, and bearish sentiment builds well in advance.
Real-World Deviations from Theory
Market Structure Can Override Supply Mechanics
While theory suggests unlocks lead to price drops, real-world outcomes vary due to external factors like market maker activity, project announcements, and holder concentration.
Worldcoin ($WLD) provides a counterexample. In July 2025, WLD entered its unlock cycle with **2.38 billion tokens** set to be linearly released over four years—representing a massive increase compared to its then-current float of under $190 million.
Yet instead of falling, WLD surged nearly 80% in three days just before the unlock—a move that liquidated many short sellers betting on a drop.
Why? Two reasons stand out:
- The project extended its unlock schedule, reducing near-term supply pressure.
- On-chain data revealed Wintermute, a key market maker, aggressively accumulating WLD on Uniswap during the uptrend.
This accumulation signaled confidence—and possibly coordination—to reprice the asset upward despite looming unlocks.
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Core Keywords
- Token unlock impact
- Cryptocurrency price volatility
- Circulating supply increase
- Airdrop sell-off
- Investor token release
- Market maker influence
- Pre-unlock trading strategy
- Unlock-to-circulation ratio
Frequently Asked Questions
Q: Do all token unlocks cause prices to drop?
A: Not necessarily. While increased supply typically exerts downward pressure, strong fundamentals, delayed release schedules, or active market making can offset or reverse expected declines.
Q: Why do prices sometimes rise before an unlock?
A: Positive news (like extended vesting), strategic buying by market makers, or short squeezes can drive pre-unlock rallies—even if fundamentals don’t fully justify them.
Q: Are airdrops always bad for price?
A: Often yes—but not always. If recipients are genuine users aligned with the project’s vision, selling pressure may be minimal. However, speculative recipients usually sell quickly, creating initial volatility.
Q: How can I anticipate unlock-related price moves?
A: Monitor vesting schedules via platforms like TokenUnlocks or Tokenomist, track large wallet movements, and assess the proportion of tokens going to investors versus communities.
Q: Can projects mitigate unlock impact?
A: Yes. Strategies include staggered releases, buybacks, staking incentives, or repurchasing tokens from treasury funds to absorb excess supply.
Q: Is it wise to short tokens before unlocks?
A: High risk. While logical, such trades can fail due to manipulation, unexpected announcements, or coordinated buying by insiders and market makers.
Conclusion
Token unlocks are more than calendar events—they’re stress tests for a project’s economic model and market resilience. Historically, large unlocks—especially those involving investor or team holdings—have correlated with price declines due to increased selling pressure and supply dilution.
However, real markets are complex. Factors like market sentiment, token utility, holder behavior, and market maker activity can override theoretical expectations. As seen with WLD and EIGEN, narrative and structure matter as much as supply math.
For informed investors, success lies not in blanket assumptions but in analyzing each unlock contextually: Who holds the tokens? How much is being released relative to circulation? What has the project done to prepare?
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