Why are tokens unlocked? 🔐
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Today we will analyze an important aspect that directly affects the price of your tokens - unlocking.
➡️ Unlocking (unlocking a token) is the "release" of tokens blocked under the terms of the project's investment attraction programs. It works like this: for investments at an early stage, crypto projects give investors their tokens. But at first, these tokens are blocked and have their own unlocking period, called vesting. Thanks to vesting, investors receive their tokens in portions and in stages, which is beneficial to both the team and long-term investors.
↪️ The purpose of the gradual unlocking of tokens: long-term maintenance of the stability of the asset price.
Blocking helps to avoid the case in which holders of large "packages" will sharply sell their existing tokens. A sharp exit of all tokens to the market can lead to a rapid collapse of the exchange rate.
➡️ Many newcomers may think: "So, big unlocks are a good opportunity to make money on the price drop (short)." But not everything is so simple!
Unlocking has not been an indicator for a long time that the token will be dumped (pulled down). Often the opposite happens:
If investors do not sell tokens in large quantities, then the Market Maker is able to keep the price by buying off the asset. And it often happens like this: before the unlocking occurs, the Market Maker pumps the price of the asset. And already during the unlocking, when investors close their positions (sell tokens to lock in profits), the price returns to the range of initial values. Thus, the project keeps the price at the same level as it was before the unlock.
➡️ As you might have guessed, unlocking tokens can lead to a strong increase in volatility. This should be taken into account, especially if you are an intraday trader or plan to conduct any operations with an asset. If you do not have any clear strategy of action, then in the days of separation it is better to "bypass it", wait out the impending storm.
Token unlocks can be tracked on this site.
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