- The altcoin market is undergoing significant turmoil as major investors and project founders start liquidating their holdings.
- A Bloomberg report attributes the downturn to various factors, including token unlocks by venture capitalists and correlation with leading network tokens.
- A noteworthy detail is that out of 138 tokens tracked by TokenUnlocks, 120 are set to unlock this year, presenting a potential $58 billion market value sell-off.
The altcoin market is facing intense selling pressure as early investors and project founders unlock and liquidate their holdings, significantly impacting token prices.
Altcoin Market Shaken by Token Unlock Frenzy
As the broader cryptocurrency market recuperates from a prolonged downturn, many altcoin projects are reaching their token unlock dates. Notably, venture capitalists and project founders who initially received these tokens for their contributions now have the liberty to sell. This has catalyzed extensive selling pressure across the altcoin market.
Research by TokenUnlocks indicates that out of the 138 monitored tokens, 120 are slated for unlocking this year, collectively holding a market value nearing $58 billion. Awareness of this forthcoming sell-off has made non-VC holders anxious, prompting premature selling and thus driving token prices down further.
Altcoins such as DYDX, Avalanche (AVAX), and Pyth (PYTH) have borne the brunt of token unlocks. Since mid-March, DYDX’s price has plummeted by over 50%, while AVAX and PYTH have also faced notable declines. These tokens saw unlocks in May, intensifying the downward price movements.
Initially, the unlocking of tokens in 2023 provided a boost to altcoin prices. However, increased scrutiny from VCs and public participants has shifted focus toward short-term profits, causing further instability for altcoins due for unlocks.
Liquidity Challenges in the Crypto Market
Since Bitcoin’s peak at $73,700 on March 14, only 12 out of the top 90 non-stablecoin assets tracked on centralized exchanges have posted gains, with 81 experiencing losses, according to the report. Bitcoin itself has seen a 12% drop since its peak.
Most top 100 tokens have seen declines exceeding 25%. Smaller altcoins, particularly those linked to major networks like Ethereum (ETH) and Solana (SOL), are often the first to be liquidated amid market downturns. Token unlocking further exacerbates this selling pressure.
Bloomberg notes that the current market conditions are particularly challenging for infrastructure projects funded during bear market phases. As these projects release their tokens, there is insufficient demand from “regular buyers” willing to purchase at high prices. The altcoin market is presently mired by a liquidity crunch, with a surplus of unlocked tokens driving prices downward.
The daily chart reveals that the total cryptocurrency market capitalization has dipped to $2.19 trillion. This trend underscores the extensive impact that token unlocks and a lack of liquidity are having on the overall market.
Conclusion
The early “crypto winter” in the altcoin market is driven by a combination of large-scale token unlocks and existing market conditions. While some tokens are seeing significant price declines, the broader market continues to grapple with liquidity issues. Investors and market participants should remain cautious, as the impact of these token unlocks is likely to persist in the near term.
