From Locked to Liquidity: What 16,000+ Token Unlocks Teach Us

Every week, over $600 million worth of previously locked tokens—equivalent to the market cap of Curve or the entire supply of Tether Gold—are released into circulation. These tokens, often freed in predetermined intervals, flow into the hands of various actors. The scale and interval of these unlocks, the anticipation and dates of them and of course the recipients who get them all play a crucial role in shaping their downstream effects on token value and market dynamics.

In a wider crypto landscape dominated by short-term decision-making and rampant profit-taking, the pacing and structure of token unlocks become pivotal to ensuring long-term value capture and fostering holder satisfaction. Unlocks are not a novel concept. In traditional finance, mechanisms like equity vesting have long been used to incentivise alignment over time. However, the methods, frequency, and impact of token unlocks differ significantly across blockchain projects, reflecting the nuances of decentralised finance. 

Across the 16,000 unlock events we analysed, a striking pattern emerged: unlocks of all types, sizes, and recipients are almost always negative for price. This highlights the importance of keeping track of unlock schedules and understanding their implications, especially for traders aiming to time the market effectively.

This article takes a trader-focused approach, examining some of the most prominent token unlocks of the past few years. We analyse how unlocks of varying sizes and recipient types influenced price trajectories, identifying recurring patterns and key behavioural differences across the ecosystem.

Two Avenues

To help you guide you through the process of understanding how to trade, make sense of and navigate these unlocks we focused on the two most important elements that can be reasonably quantified. The Size of the Airdrop relative to the total Supply and the recipient class of the airdrop, who is on the receiving end. Understanding these together helps paint a full picture to make informed decisions.

Imagine you are looking to either time a large entry or exit of a long term position on a token, be it for an Protocol or a dApp. You have studied the charts, tapped into the online narrative and sufficiently researched the protocol’s tech, but you know the last thing you need to get right is timing. As a trader you are not clairvoyant to the overall retail decision to buy or sell but there is information on another set of holders, those on the vesting table. Unlock schedules are the key to the puzzle, they don’t just hint towards future supply shocks but act as leading indicators of sentiment and volatility. 

Now what?

Most vesting tables look like the one above: a long-term calendar punctuated by “Cliffs” and “Linear or Batch Unlock Blocks.” These blocks are designated for various recipients—categories like “Seed Investors,” “Core Contributors,” or “Community.” To the uninitiated, this might be confusing or hard to read. But we’ll walk you through it. All you need to know to start is that many of these unlock events represent significant portions of the supply.

Designing unlocks is a tricky task for any project. You can’t simply give everything away upfront because the recipient could walk away and sell it off. But you also can’t make them wait too long, or they may decide the risk isn’t worth it. Projects must strike a balance: incentivise recipients to stay for the project’s initial growth while also keeping them engaged for the long term. The solution is typically to distribute equity gradually over a designated vesting period.

A typical unlock might look something like this: a vesting period begins at the start of the relationship between the recipient and the organisation and lasts until the full allocation is distributed. For most crypto projects, these periods are outlined early in the whitepaper. Over the first ⅓ ± ¼ of the vesting period, there may be no equity distributed. Then, a substantial chunk is released all at once, followed by a linear unlock over the remainder of the period.

This approach works well because it ensures recipients, whether they’re developers or investors, make a minimum commitment before receiving rewards. Developers, for example, are incentivised to stay onboard for gradual distributions, while investors face an initial lockup followed by partial cash-outs, with slow unlocks reducing market pressure.

Not all unlocks follow this structure. Some, known as “Batch Unlocks,” release everything at the end of the cliff. Others are purely linear, starting with no cliff and distributing equity periodically until fully allocated.

Solana Approach

Solana’s vesting schedule is a great example of combining all three types. It began with a no-cliff linear unlock for tokens designated to the community and public auctions, ensuring tokens were quickly circulating in the ecosystem. This released 34.9% of the supply evenly over nine months.

After a one-year cliff, tokens from the Seed Round, Foundation, and Validators were batch unlocked simultaneously. Finally, the team followed a hybrid model: they received 50% of their allocation after a nine-month cliff, with the remainder distributed monthly over two years.

Blurred Boundaries in Unlock Size

Unlock size and type create a complex challenge. If we want to understand how unlock size (relative to total circulating supply) affects token prices, how should we evaluate these events?

One approach is to analyse the effect of the unlock size over the vesting period, but this raises issues:

• • Unlock size isn’t consistent. Following a cliff, the initial batch release is typically much larger than subsequent months of smaller releases.
  • Vesting periods can be long. Analysing token prices over the entire period reflects general price trends rather than isolating unlock impacts.

To address these challenges, we broke down each vesting period into individual unlock events. By treating each part of an unlock as a discrete event, we could categorise and analyse them separately.

Imagine a token with a 20% total supply allocated to the team over two years. After a one-year cliff, the team receives 50% of the allocation upfront, with the remaining amount distributed linearly over 11 months. This creates 12 discrete unlock events:

• • Initial Cliff: A single event releasing 10% of the total token supply (20% * 50%).
  • Remaining Linear Unlocks: Eleven events releasing 0.9% each month (10% / 11 months).

To analyse the impact, we categorised each unlock by size:

• • Nano Unlocks: <0.1%, Negligible in scale, often unnoticed by the market.
  • Micro Unlocks: Between 0.1% and 0.5%, Small enough to cause minimal impact.
  • Small Unlocks: Between 0.5% and 1%, Modest in size but capable of influencing market sentiment under certain conditions.
  • Medium Unlocks: Between 1% and 5%, Significant events that warrant attention from traders and analysts.
  • Large Unlocks: Between 5% and 10%, Substantial releases with a high probability of impacting token prices and market behaviour.

• • Huge Unlocks: >10%, Anticipated events, often for long locked tokens or large community airdrop distribution events.

In the example above the initial Cliff unlock would be considered a Huge unlock and the remaining unlocks would be classified as small.

As traders, we want to know: when is the best time to exit or enter a token position? When can we expect ripples from unlocks to trickle through the market, and what should we pay attention to? At what point does size begin to matter? Can we afford to wait months—or even years—for a linear unlock to complete?

Looking both ways before Crossing: The path to the method

We began by breaking down vesting periods over 16,000 composite events, categorising each by size. For every event, we tracked the daily token price for 30 days before and 30 days after the unlock. This approach recognises that it’s not just the unlock itself that impacts the market; the lead-up often suppresses prices as sellers pre-empt the event by reducing exposure. Larger entities may also hedge their exposure, creating secondary effects that we’ll explore later.

Additionally, we tracked a “Median” Price and Volatility metric for the month prior to the 30-day pre-unlock period for each token. This was critical because many projects employ monthly unlock schedules for their linear portions. The unlocks preceding the next linear one can affect our analysis. While this method isn’t perfect, it helps us better isolate smaller unlocks—Nano, Micro, and Small—that tend to follow one another, especially when they continuously suppress prices.

Lastly, no asset exists in isolation from the market. This is particularly true for altcoins, which often exhibit extreme beta correlation to their protocol tokens. For instance, if a large $JUP unlock coincides with a $SOL ETF approval that pushes $SOL prices upwards, it’s difficult to isolate the unlock’s impact on $JUP. To account for this, we normalised price movements in our data series for each unlock.

Normalising with ETH

To simplify, we chose ETH as our normalising benchmark, as all the projects we analysed exhibit some degree of beta correlation with it regardless of their native chain. We then weighted prices in our samples—before, during, and after unlock events—against ETH to derive a more market-independent metric.

Size isn’t everything

After breaking down, categorising, and quantifying our unlock events, we began by plotting average price impacts at various intervals after the unlock date. When visualised, the data appeared messy. You might expect a proportional relationship between unlock size and price impact, but beyond the 7-day mark, the correlation weakens.

When scaled for relative size, most unlocks appear similar in the degree of price suppression they cause. Instead, frequency emerges as the more telling factor. As discussed, unlocks often occur as either a single large batch after the initial cliff or as a continuation until the end of the vesting period. For anything other than Large or Huge unlocks, we observe consistent downward price pressure from smaller, steady unlocks. However, in the data above, it’s challenging to discern whether one approach is better or worse due to size misalignment.

The Cliff vs Linear divide

What becomes clearer in the data is the behavioural profile of larger unlocks leading up to the event. In the 30 days prior, we typically see consistent price drawdowns, with the decline accelerating in the final week. After the unlock, prices tend to stabilise within roughly 14 days, returning to neutral.

This price action can likely be attributed to two main phenomena:

• • Sophisticated Hedging:
    Large unlocks are often allocated to sophisticated recipients who use market makers to hedge their exposure. By locking in prices or capitalising on volatility before the unlock, these parties reduce token pressure and mitigate the unlock’s immediate effects. Most firms, including ours, start hedging 1–2 weeks or even a month before depending on the size. When executed correctly, this strategy effectively minimises the unlock’s impact on the market. We’ll cover this process in greater detail in a later section.
  • Retail Preanticipation:
    The sharp declines in the final week are likely due to retail traders pre-emptively pushing prices down. Knowing an unlock is imminent, they sell to avoid dilution, often unaware that the recipients of the unlock may have already completed their selling via hedging.

This behavioural pattern is also evident in the weighted volume of different categories, which frequently peaks 28 or 14 days prior to an unlock.

Interestingly, the data shows that Huge Unlocks (>10% of supply) perform as well or even better than Large Unlocks (5%–10%). This may be because such massive unlocks cannot be entirely hedged due to their size and cannot be dumped or unwound within 30 days. As a result, their market effects tend to be more gradual and drawn out.

The last chart to consider highlights changes in volatility. Unsurprisingly, large unlocks cause significant volatility on the first day. However, this volatility largely subsides within 14 days.

So, Armed with the Knowledge—How Do You Trade It?

Now that you have the data, how can you apply it to trading? For the most part, the key is to focus on Huge and Large Unlocks on the calendar. These are typically the starting cliffs that transition into linear unlocks. For any given unlock, the proportion granted at the cliff can vary widely—anywhere from 10% to 50% of the allocated amount. What truly matters is how much that unlock represents relative to the total supply. Do the maths:

Total Unlock % of Supply × Cliff %

Our data suggests the best time to enter after a major unlock is 14 days, once volatility has settled and hedges may have unwound. For exiting, the optimal time is 30 days before a major unlock, when hedging or market pre-reactions tend to begin.

For smaller unlocks, it’s often best to wait until they are completed. If that timeline isn’t feasible, precise timing becomes less critical—looking at who the recipient is may provide a better indicator of impact.

The second and arguably most important piece of knowledge when analysing unlocks is the recipient type. Who is on the receiving end of the tokens, and what does that mean for price action? Recipients can vary widely, but they typically fall into five primary categories:

• • Investor unlocks: Tokens allocated to early investors as compensation for funding the project.
  • Team Unlocks: Tokens reserved for rewarding the core team, either through lump-sum payments or as ongoing salaries.
  • Ecosystem Development Unlocks: Tokens injected into the ecosystem to fund activities like liquidity provision, network security, or grants.
  • Public/Community Unlocks: Tokens distributed to the public via airdrops, user rewards, or staking incentives.
  • Burn Unlocks: Tokens unlocked solely to be burned, reducing supply. These are rare and excluded from this analysis

There’s no shortage of opinions on which recipient type has the most significant downstream price impact. Some argue that community airdrops are largely farmed by Sybil attackers and thus flood the market with sell pressure. Others contend that injecting millions of tokens into the ecosystem dilutes value. Yet others believe VCs and investors are the quickest to dump and realise their profits.

After analysing thousands of unlock events, the data speaks clearly:

• • Almost all categories exhibit a negative price impact, but there are critical nuances.
  • Ecosystem Development unlocks emerge as the least damaging, while Team Unlocks consistently lead to the largest price drawdowns.
  • Investor and Public/Community Unlocks are tied for moderate price impacts.

However, as with size, these numbers alone don’t tell the whole story. When you plot the price movement by recipient type in the 30 days before and after unlock events, distinct behavioural profiles emerge.

At first glance, the data makes it clear: Team unlocks are the most damaging, while Ecosystem unlocks barely register as a threat. But these surface-level insights only scratch the surface. Why do discrepancies exist? What drives recipient behaviour? And what lessons can protocols learn from this data?

Worst Offender: Team Unlocks

Team Unlocks emerge as one of the most detrimental categories for price stability. When the team is up for reaching the Cliff or in the middle of distribution you should take caution.

When we plot our average price impact, the token price impact follows a roughly linear decline that starts upwards of 30 days before the unlock date and continues at a severe angle. So why is this? Team unlocks tend to have two characteristics that amplify their price impact more than other recipient classes.

Uncoordinated Selling by Individual Team Members:

• • • Teams often consist of multiple actors with differing financial goals and no coordinated approach to liquidating their tokens.
    • Many team members view their tokens as compensation for labour performed over extended periods—sometimes years—before receiving proper remuneration. When these tokens unlock, especially in a cliff, the motivation to monetise is high and understandable.
    • Even for linear unlocks, these tokens often form a significant portion of their income, with sales required for personal financial obligations.

Lack of Hedging or Mitigation Strategies:

• • • Unlike large investors or institutions, teams rarely employ sophisticated techniques to reduce market impact when selling.
    • Entities with more experience often enlist market makers to strategically manage large token distributions. For example, a firm like Keyrock may strategically place maker ask-side orders during high-volume periods, spreading the sell pressure over time and avoiding taker orders that exacerbate price declines.
    • Additionally, pre-hedging strategies can lock in prices over time, reducing the immediate pressure on the market when the unlock occurs.

So these explain why the price is so negative but why do we observe price decline also 30 days before? This is potentially in large part a combination of the severe price impact and the overlapping linear unlocks. Why do we try to control for Median price before our observation as many unlocks are back to back, the data still reveals there is repression. In this regard if you do its best to not just skip the batch unlock cliff but even hold off while in the linear period of the unlock before purchasing.

One of the most striking examples of a Team Unlock impacting price comes from Yuga Labs’s Apecoin. On March 1, 2023, the linear Team Unlock began releasing 0.7% of the total token supply per month. With a market cap of $1.6 billion at the time, this equated to approximately $11 million worth of tokens entering the market monthly.

Over the next seven months, $APE’s price fell by 77%. Greater market conditions likely did not play a significant role in this as ETH only fell by 9% over this period, rather it was a combination of lack of interest in the APE product and the continued scale and consistency of the team unlock dumps. We know this as onchain data shows the team depositing into Market Maker OTC accounts. Knowing this was an upcoming vesting unlock that was going to persist for a while could have helped better inform a trade to potentially hold off on Buying Ape at that time.

Ecosystem Development Unlocks: A Strategic Advantage

On more positive news when looking at Ecosystem development unlocks we see a distinctive trend: a slight price suppression in the 30 days leading up to the unlock, followed by an immediate positive price impact once the unlock occurs. So why is it that despite releasing more tokens diluting the circulating supply we see positive outcomes? This is because unlike other unlock types, Ecosystem Development unlocks often channel tokens into initiatives that create long-term value and strengthen the protocol.

Why Post-Unlock Prices Recover (and Often Rise):

Liquidity Provision:

• • Tokens are frequently allocated to lending platforms or liquidity pools, increasing market depth, reducing slippage, and improving overall token availability. By enhancing “market availability,” these unlocks not only stabilise trading conditions but also foster greater confidence among participants.

Participation Incentivisation:

• • Ecosystem funds often drive user engagement through incentive programmes. These initiatives, such as liquidity mining or staking rewards, generate a flywheel effect of participation, boosting network activity. As participants recognise the potential for sustained growth, they are less likely to sell immediately, opting instead to remain invested in the ecosystem’s trajectory.

Grants and Infrastructure Funding:

• • Developer grants and funding for infrastructure projects support the creation of dApps and network scalability. While the benefits of these investments typically take 6–12 months to materialise, they signal a long-term commitment to ecosystem growth, mitigating sell pressure in the short term.

Understanding Pre-Unlock Price Suppression

But what explains the pre-unlock price decline before the unlock? For this we can identify two reasons that drive this behavior.

Key Drivers of Pre-Unlock Suppression:

Anticipatory Selloff:

1. • As noted before many investors pre-emptively sell ahead of unlocks, assuming that increased token supply will dilute value, regardless of the unlock’s purpose. This is particularly common among retail participants, where misconceptions about unlock types drive short-term decisions. 

Liquidity Preparation:

• • Large recipients of grants or allocations often need to prepare liquidity in advance. For example, to seed liquidity pools on decentralised exchanges (DEXs), recipients may sell existing holdings to secure stablecoins or other pairing assets. This preparatory selling can create downward price pressure even before tokens are deployed.
  • Case Study: In October 2023, Camelot DEX on Arbitrum received a 3.09 million ARB grant. Shortly after, liquidity in ARB/USDC/ETH pools increased significantly. While there’s no direct confirmation of pre-sales, it is plausible that some ARB tokens were sold ahead of deployment to secure stablecoin liquidity. This underscores the importance of understanding how ecosystem unlocks interact with liquidity strategies.

Optimism: Unlocks as a Catalyst for Growth

Optimism’s strategy following its aggressive June 2022 unlock offers a textbook example of how ecosystem unlocks, when well-designed, can drive both immediate utility and long-term growth. Despite an initial selloff, Optimism demonstrated how aligning unlocks with targeted incentives can transform a supply shock into a springboard for expansion.

The June 2022 Governance Fund Unlock

In this unlock, approximately 3% of Optimism’s market cap was allocated to the Governance Fund. While this significant injection of tokens into circulation initially triggered some sell pressure—amplified by residual effects from a $OP airdrop seven days earlier, the framework for deployment quickly set the stage for recovery.

Over the next 60 days, 36 million $OP tokens were strategically distributed to 24 different projects. The funds were allocated with two primary objectives:

• • Supporting emerging dApps and protocols to grow the ecosystem.
  • Strengthening infrastructure critical to sustaining long-term network operations.

Optimism’s Strategy: What Traders Can Learn

So what exactly made this ecosystem unlock so successful?

Strategic Allocation of Tokens

• • Empowering New dApps: Optimism funded emerging projects like Hop, Synapse, Stargate, and Perp Protocol, driving user engagement and liquidity. These incentives boosted network activity while strengthening the ecosystem’s value proposition.
  • Bolstering Infrastructure: Grants to established partners like Chainlink ensured the stability and scalability of critical network operations, supporting long-term sustainability.
  • Broad and Transparent Distribution: By spreading tokens across 24 projects over 60 days, Optimism avoided overconcentration and signalled its commitment to growth, calming investor fears of immediate sell pressure.

The takeaway here is that you can not just assume that all ecosystem unlocks will be positive events. Take note of what the prioritizes for growth, and how mature are the recipients of these funds. Keeping an eye on Execution, and making sure the unlock is gradual and doesn’t flood the supply too quickly. If these factors look good you can take comfort in knowing they will likely have bullish results.

The Smartest Guys in the Room: Investor Unlocks

Investor unlocks are among the most predictable events in token markets. Unlike other categories, these unlocks typically exhibit controlled price performances, with data from 106 events showing a consistent trend: slow, minimal price declines. This stability is no accident. Early investors—whether from Angel Rounds or Series C—often come from venture capital backgrounds and bring significant expertise to managing their positions.

These investors are not merely offloading risk; they’re optimising returns while actively avoiding actions that could disrupt the market. By understanding the sophisticated strategies they employ, traders can anticipate how these events will unfold and adjust their positions accordingly.

Backchannel OTC:
Investors often engage liquidity providers or OTC desks to sell large inventories directly to willing buyers. This method bypasses public order books entirely, preventing immediate sell-side pressure and avoiding signalling to the market. As an OTC provider we seek to find other clients in our pool, spread liquidity in orders through exchanges or take on the exposure ourselves while hedging.

T/VWAP & Hedging:
Time-Weighted Average Price (TWAP) executions or Volume-Weighted Average Price (VWAP) strategies help disperse token sales over time, reducing price impact. Many investors also pre-hedge their positions using futures to “lock in” prices ahead of unlock events. These positions are then unwound gradually post-unlock to further minimise volatility.

• • • “Lock in” or “Hedging” is effectively using derivatives to open a short position prior to the unlock date, This helps guarantee a price early on as the short is unwound as the tokens sold off.

Options:
Bespoke options strategies provide the most sophisticated tools for managing unlocks. Investors may sell call options, negotiate customised put options, or design multi-option strategies with third parties. These methods allow them to hedge risk or generate additional returns on their positions.

• • • A recipient can sell a call option against their own future unlock tokens.
    • A recipient might purchase a put option to pair with their future unlock.

Hedging through options often requires delta adjustments, where counterparties trade underlying tokens to maintain balance. These trades, however, are executed with precision, ensuring minimal disruption to the market.

Since 2021, the use of advanced options strategy has expanded beyond investors, with project teams increasingly adopting them to generate recurring revenue or manage treasuries more effectively. For traders, this evolution reflects the growing sophistication of the crypto market—unlocking opportunities to anticipate and align with the strategies of major players. Options, whether privately resold or used as collateral for loans, now play a pivotal role in shaping market dynamics, offering informed traders a clearer lens through which to interpret token activity.

Retail Tepidation: Community & Public Unlocks

Community and public unlocks, such as airdrops and points-based rewards programmes, mirror investor unlocks in behaviour, with gradual price declines both before and after the event. This dynamic is shaped by two distinct behaviours among recipients:

• • Immediate Sellers: Many retail participants liquidate rewards upon receipt, prioritising liquidity.
  • Long-Term Holders: Surprisingly, most public airdrops are held rather than sold, reflecting a base of engaged users or less active traders.

While aggregate price impacts are modest, these outcomes highlight the importance of well-designed reward programmes. Thoughtful calibration can prevent unnecessary market disruption while achieving the intended goal of fostering community growth and engagement. For deeper insights, see our earlier research on minimising risks in large token distributions.

Token unlocks are an essential mechanism in the crypto ecosystem, funding development, incentivising participation, and rewarding contributors. However, their intervals, sizes, and recipient classes are critical factors in determining their price impact. Learning what those impacts are and why they happen help make better trades and help protocols structure their unlocks better.

Our analysis of 16,000+ unlock events across 40 tokens underscores key trends:

• • Linear unlocks outperform initial cliff unlocks in reducing short-term disruption, though larger cliffs often recover better after 30 days.
  • The most significant price movements often stem not from token recipients but from retail traders reacting to narratives and broader sentiment.

Recipient Class Dynamics

• • Ecosystem Unlocks: Consistently positive outcomes, driving growth through liquidity provision, user incentives, and infrastructure funding.
  • Investor Unlocks: Minimal disruption due to sophisticated strategies like OTC sales, TWAP/VWAP executions, and options hedging.
  • Team Unlocks: The most disruptive category, with poor coordination and unsophisticated selling leading to significant price declines. Teams could mitigate this by working with market makers to minimise impact.
  • Community Unlocks: Limited long-term effects, as many recipients hold tokens, though short-term “farmers” often sell for immediate gains.

Before entering a long-term trade, always review unlock calendars using tools like CryptoRank, Tokonomist, or CoinGecko. Unlock events are often misunderstood, yet they play a crucial role in token performance.

Contrary to popular belief, VC and investor unlocks are not the primary drivers of price declines. These participants often align with the protocol’s long-term goals, employing strategies that limit market disruption and maximise returns. Instead, team unlocks require closer attention, as poorly managed distributions frequently lead to downward pressure on token prices.

Conversely, looking towards ecosystem unlocks presents a unique opportunity. When aligned with clear growth objectives, they often act as catalysts for adoption and liquidity, making them favourable moments to consider entering the market.

Ultimately, token unlocks are more than scheduled events—they are critical indicators of a project’s priorities and market dynamics. By incorporating unlock analysis into your investment decisions, you’ll gain an edge in navigating the complex, ever-evolving crypto landscape.