Token unlock schedules are one of the most underrated risks in altcoin investing. In this piece we walk through the key points a professional investor would consider before drawing conclusions.
Why unlocks matter
Every altcoin that raised private money has a token unlock schedule. Insiders and early investors receive tokens on a defined vesting schedule, often with cliffs and long tails. When those tokens unlock, they can dramatically increase circulating supply and pressure the price.
Reading the schedule
Look at the ratio of circulating supply to fully diluted supply. If a token has a very low circulating-to-fully-diluted ratio, the market cap you see is far smaller than the fully diluted market cap that will eventually exist. That gap is the future supply overhang.
The behavioural pattern
Prices often drift into the days before a large unlock, as savvy traders position ahead of expected supply. The actual unlock day can then be a local low, as forced-seller expectations have already been priced in. Not always — but often enough to be worth watching.
How to use this
Before you buy an altcoin, look up the next three unlock dates. If a large unlock is imminent, either wait for it or size your entry accordingly. Ignoring this is one of the most common ways new altcoin investors lose money.
Editorial disclaimer
This article is provided by CryptocyNews for informational purposes only. It is not personalised financial advice and should not be treated as such. Digital assets are volatile; consult a qualified adviser before making decisions and never risk more than you can afford to lose.