In the fluctuating world of cryptocurrency, the release of tokens back into the marketplace is a familiar event but its impact on market prices is undeniable. Currently, those with a stake in AVAX are bracing for the potential economic tremor that might accompany the unwrapping of a substantial quantity of tokens.
Set to occur, the pending unlock for AVAX will release 9.5 million tokens to the market. Given AVAX’s current trading level, hovering above $21, this sizable introduction raises the stakes with an influx valued at roughly $204 million.
Analysts studying the pattern of token unlocks have pinpointed that this release will swell up AVAX’s circulating supply by an additional 2.68%, altering the total percentage from 55% to 57.68%. As new tokens pour into the ecosystem, these cliff unlocks could create meaningful barriers to the token’s price surges due to the escalating supply.
Delving into the distribution of the unlocked tokens reveals that staking rewards claim the lion’s share, with a 50% allocation. The AVAX team and the associated foundation are set to receive lesser portions, earmarked at 10% and 9.3%, respectively.
The ramifications of such unlocks on token value are fairly straightforward—an augmented supply generally heralds a downturn in price. This outlook is supported by the aftermath of the previous unlock event with a similar scale of tokens, which happened on August 23, 2023, resulting in only a nominal price decline. This outcome could indicate market anticipation and prior pricing of the impact.
Despite the prospect of price stabilization post-unlock, conditions today diverge from those of past unlocks, particularly with the rapid rise in AVAX’s price just a day prior. This spike may prompt investors, 66% of whom are now seeing profits—a peak not observed in 20 months—to capitalize on the rebound by selling. Such a move could potentially plunge the price towards the $10 benchmark, echoing the past’s dramatic 70% descent post-profit-taking observed in April 2022.
It remains to be seen whether the AVAX market can stave off a sell-off in the face of new supplies. While historical data suggests resilience, the unpredictable nature of cryptocurrencies means that the full impact of the AVAX unlock will only be measured in time.