Even if an encryption project announces that hundreds of millions of dollars worth of tokens will be unlocked in the future, the price may not fluctuate significantly. On the other hand, some tokens, even with a much smaller amount released, may immediately face heavy selling pressure.
The reason is that unlocking does not equate to selling.
Token unlocking refers to the process where a project releases previously restricted tokens according to a predetermined schedule, allowing founders, employees, early investors, ecosystem funds, or other recipients to obtain these tokens. Whether such tokens will actually impact the market depends on who receives them, the proportion of tokens released relative to the total supply in circulation, and the market's capacity to absorb potential sales.
Unlocking scale is more important than "US dollars headline".
Token unlocking tracking tools usually describe events in terms of dollars. A project might experience an “unlocking of $200 million,” and this figure is calculated based on the number of tokens planned to be released and their current market price.
But this doesn't mean that suddenly $200 million will be sold off.
A more valuable indicator is the percentage of unlocked tokens relative to the total circulating supply. Tokenomist tracks the upcoming unlocks based on their proportion to the current circulating supply, as this can show how much the tradable circulating supply may increase.
If a release amount equivalent to 15% of the circulating supply could substantially change the supply and demand structure of a small token; if it's only equivalent to 0.5%, the market might absorb it much more easily.
This is also why investors compare the market value with FDV (fully diluted valuation). A large gap between the two may indicate that there is still a considerable amount of supply that has not yet entered the market.
Who will receive these tokens?
Where the unlocked tokens flow may be just as important as the scale of the unlocking itself.
If tokens are released to early venture capital investors or team members, the market tends to worry even more, as these holders may have an extremely low cost of holding, and therefore have a stronger motivation to profit and exit their positions.
Ecosystem distribution, on the other hand, varies. The relevant tokens may be used for funding, staking incentives, liquidity programs, or treasury purposes, rather than immediately flowing into exchanges.
The same is true for the attribution timeline itself. Tokenomist distinguishes between cliff-style unlocking and linear release: cliff-style unlocking involves a concentrated release of tokens at a specific point in time, whereas a linear timeline results in a continuous supply release, usually on a daily basis.
Therefore, large-scale cliff-style unlocks may lead to sudden changes in available supply, whereas gradual releases give the market more time to digest these changes.
Liquidity determines how much selling pressure the market can withstand.
Assume there are two types of tokens, each set to unlock $50 million.
One of them trades tens of billions of dollars daily on order books with good depth, while the actual daily liquidity of the other is only 10 million dollars. Even if only a portion of the recipients choose to sell, the latter will become even more vulnerable.
This is what is known as the market's absorption capacity: the amount of new supply that the market can accommodate without causing significant price dislocations. Tokenomist assesses this capacity by taking into account factors such as trading volume, order book depth, and the existing circulating supply. Insufficient liquidity is also why large holders can have an excessive impact on smaller crypto markets, and this dynamics is related to "liquidity exit" as well.
