- SUI, PUMP, and ZRO among tokens adding significant supply to circulation.
- Token unlocks are often done in increments to prevent sudden crashes.
- They tend to trigger volatility, price dips, and trader sell-offs or shorting strategies.
The altcoin season could be postponed, as some of the key players in the market are about to increase their maximum supply by a hefty amount.
In December, based on current token prices, there will be an influx of $1.8 billion worth of altcoins through token unlocks, CryptoRank just reported. In a tweet published earlier today, the crypto research platform said that the likes of SUI, ASTER, ZRO, PUMP, and many others will see additional tokens flood the market.
SUI is expected to increase its supply by $86.86 million, equalling 55.54 million tokens, or 1.51% of its entire market capitalization. Pump.fun’s token, $PUMP, will also add 1.70% of its market cap in tokens, which will see an additional 10 billion tokens ($31.22 million) enter the market. On December 20, LayerZero ($ZRO) plans to add 24.68 million new tokens, or 10.3% of its market cap, worth $33.70 million.
Related: Here is Why Investors Expect an Altcoin Season to Happen Soon
What are ‘token unlocks’ and why are they important?
When a project is launched, not all tokens are immediately available. A significant amount is ‘locked’ for early investors, founders, or advisors, and it helps stabilize the price. It also prevents early adopters from crashing the price on launch day and scaring newcomers away.
A token unlock is the moment the tokens are allowed to be sold on the open market, but even then, holders are prevented from selling their entire bag and are instead forced to do it in increments. Many of the coins mentioned in CryptoRank’s new report have had token unlocks before, and will most likely have additional ones in the future.
However, token unlocks are always followed by a period of volatility and instability. They usually mean the price of the token dips, and if the demand does not increase as well, the price might stay lower.
Numerous traders expect token unlocks to push the prices down and try to front-run the event by selling before the unlock, further compounding the crash. Others will “short” the event, betting on the prices going even lower.
Related: Fed to Stop Draining Cash From December 1, Setting Stage for Crypto Rally
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