Three Strategies To Follow During the $10 Bn Token Unlocks in Q3 and Q4

• Large token unlocks exceeding 1% of supply can lead to price fluctuations in the crypto market.
• Tokens with over 70% of their supply vested tend to exhibit lower volatility and higher prices, according to DeFi Warhol’s analysis.
• DeFi Warhol advises investors to wait for market reactions and avoid making obvious moves during token unlock events.

The crypto market is anticipating a key event as nearly $10 billion in token unlocks are expected in Q3 and Q4 of 2024. This massive influx of tokens could potentially reshape market dynamics. Crypto analyst DeFi Warhol has shared insights on how investors can navigate this period.

DeFi Warhol, a figure in the crypto space, analyzed over 5,000 token unlocks to identify patterns. He found that small unlocks (0-1%) typically have minimal price impact. However, larger unlocks exceeding 1% often lead to more price fluctuations. Interestingly, tokens with over 70% of their supply already vested tend to show lower volatility and higher prices.

The analyst outlined three main scenarios that often play out during token unlocks. The “Dump and Pump” scenario, exemplified by DYDX’s December unlock, saw an initial price dip followed by a short squeeze. This resulted in a 16% price surge as excessive short positions were liquidated.

In contrast, the “Pump and Dump” scenario was observed with APT. DeFi Warhol noted that APT experienced three consecutive unlocks within 90 days, releasing almost 7% of its supply. Each event followed a similar pattern: prices hit local lows days before the unlock, then surged 25-35% leading up to the event.

The third scenario, “Dump and Dump,” represents a continual price decline. DeFi Warhol cited INSP as an example, which has lost 90% of its value from its recent all-time high. He advises against considering this scenario, as it often indicates a project in serious trouble.

To help investors navigate these unlocks, DeFi Warhol offered several tips. He emphasized the importance of assessing market sentiment and following trends. Moreover, he suggested focusing on tokens with past unlock events for historical insights. Setting alerts for upcoming unlocks on held tokens can also be beneficial.

DeFi Warhol cautioned against making obvious moves or trying to outsmart the market. Instead, he recommends waiting for crowd reactions to unfold before taking action. This patient approach could help investors avoid becoming exit liquidity for venture capitalists during these significant market events.