In February, nearly $900 million worth of crypto will be unlocked and made available for sale. This sudden increase in supply could weigh on prices and threaten the health of the crypto market.
A rain of chips on a weakened market
February 2024 will mark a crucial milestone with the substantial release of tokens from flagship projects. According to data from Token Unlocks, Avalanche, Aptos, The Sandbox, Optimism, and Sui are preparing to inject nearly $900 million worth of crypto into circulation.
Avalanche comes out on top, with the release scheduled for February 22 of 9.5 million AVAX tokens, valued at $320 million at the current price. Then come Aptos and its 24.8 million tokens worth $233 million, or The Sandbox and its 209 million tokens worth $90 million.
These cryptos were until now subject to a vesting mechanism, locking their access for a specific period. Their massive unlocking in February raises fears of a sudden influx of tokens onto the market.
A downside risk for prices!
According to the principles of tokenomicsa rapid increase in the circulating supply of a given crypto can put downward pressure on its price.
Indeed, the value of an asset depends on the balance between supply and demand: the more supply increases, the more sellers must lower their prices to find buyers. Especially if this increase in supply is not offset by an equivalent increase in demand.
The massive influx of new crypto tokens in February could thus weigh on prices, leading to a downward movement across the entire market. Even if the real impact will depend a lot on the volumes actually sold, and not just released.
The fact remains that in the current context, already marked by a crypto winter since the approval of the Bitcoin Spot ETFs, this release will not help restore market sentiment. There is a very real risk of seeing the downward trend intensify in February.
In short, nearly $900 million in cryptos will be freed from the smart contracts that kept them locked. This sudden increase in supply presents a downside risk to prices, particularly if it is not offset by an equivalent increase in demand. In this context, caution remains essential.
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