Steemit Crypto Academy Contest / S11W6 - Token Unlock

Once again, I am glad to be part of Steemit Crypto Academy Contest Season 11 Week 6 - "Token Unlock

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"You have a wide ask in form of "What is Token Unlock?"

And as you said "Tokenomics of a cryptocurrency, an unlock token represents when a certain amount of a project's tokens are released after a lockout period.

I agree with you when you say :-

This key milestone is attracting the attention of investors, as it can lead to a sudden increase in the number of tokens in circulation and influence the price of the crypto. Discover in detail the concept of unlock tokens.

We all know that awareness about cryptocurrencies is spreading at a rapid rate and everyone worth his salt is trying to invest in cryptocurrencies or at least trying to understand the basics of investment and its fundamentals. I am one of them and lately trying my best to learn the dynamics of investing, the vesting the period which are all crucial.

Today I will try to explain what is token lockups and why should we know the value of the same to be a successful investor with my limited knowledge of this complicated subject.

𝕎𝕙𝕪 𝕕𝕠 𝕤𝕠𝕞𝕖 𝕡𝕣𝕠𝕛𝕖𝕔𝕥𝕤 𝕔𝕙𝕠𝕠𝕤𝕖 𝕥𝕠 𝕝𝕠𝕔𝕜 𝕒 𝕢𝕦𝕒𝕟𝕥𝕚𝕥𝕪 𝕠𝕗 𝕥𝕙𝕖𝕤𝕖 𝕥𝕠𝕜𝕖𝕟𝕤?

What I understand about "Token Lockup" is that it refers to a certain amount of assets that were previously locked or restricted from circulation in the crypto market. Most of these tokens are held back by project developers or maybe the ones who invested in an early stage I have 200 million tokens of DOS BEP20 which I received as an airdrop but they are out of circulation right now.

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There are many other tokens in different airdrops but once they start selling them the rates go down and in that case a portion of tokens is locked for trading. I also received 54 Ampleforth when it was priced at $39 because I had a few AMPLE in my wallet. But as soon as they started distributing it its; price rose to $73 and ultimately touched rock bottom at $2.3 because people started selling it.

The methods by which these tokens are locked and then how they are released

An early investor can significantly impact market liquidity. As we know when the previously locked tokens enter into the open market can increase the liquidity of that particular cryptocurrency. Once the token is unlocked it immediately leads to higher trading and influences markets as the price shows unpredictable volatility.

Lockups serve to maintain the stability of the asset’s price, prevent massive sell-offs, and ensure the commitment of the team and early investors to the project. So, what happens when these tokens are unlocked?

At the same time, if the developers create an atmosphere of confidence towards their project and unlock it as per the anticipation of investors, it may increase liquidity and work in favor of the token's stability, longevity. So it all depends on what are the potential impacts of the locking/vesting period which plays a major role in the market.

Unlocks and Their Market Impact

You know, we can talk any amount on paper but the real impact or reaction is always beyond any theoretical analysis. The real impact of unlocking takes a lot of planning and clever insights by the project developers.

What is the impact of an unlock token on the price of a crypto and how is it monitored? Give an example.

How many of you remember when BCH unlock happened at the end of 2020? There was a BCH unlock, which caused a slight price drop which was natural due to increased supply. However, the price recovered as the market absorbed the new crypto assets, demonstrating the resilience of a mature project.

Do you think that all cryptocurrency ecosystems have developed this kind of lock? Steem.Inc Inc. among them? If yes or no, do you think it is or will be beneficial if used or added to its ecosystem? For what?

I don't think every cryptocurrency ecosystem has developed this system of locking, but yes various systems adapt different methods and experiment with them. Actually there are very few methods to predict the future with any firm understanding about the impact of lockups or when you unlock your tokens because in either case the chances are the crypto market might react sharply and go volatile.

I am sure if Steem.Inc. does the same and locks a certain amount, then unlocks it after a certain amount of time with vesting. It can bring opportunities for better liquidity and high gains but it always carries high risks of unexpected volatility and market uncertainty. Unlocking a token can disturb the stability of that particular token and send a wave of uncertainty through the market.

So before unlocking a token the developers should study the impact or they should make more balanced decision and better understand the complexities that might stir the mood of their stockholders. Remember, as they say forewarned is always forearmed especially in the world of crypto, it can cause profit, as well as bring disaster.

List the risks and benefits of unlock tokens in a simple and understandable way.

As far as I know, vesting periods often result in price fluctuations. The result of a large volume of cryptocurrencies entering the market is obviously oversupply shown in its price, and the pressure of selling pushes the market downward. But we can't say that as a general rule, in some cases it boosts up the international market or the impact is not negative, but it all depends on how the unlock works on investors' portfolios. It can even attract more investors and push the price up. Overall, an unlock can work both ways in market dynamics.

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This lock-up period could be crucial either way.

The summary of - Token locks unlocks and their market impacts

However, lockup of any token creates doubts in the minds of investors, so the developers of Blockchain keep in mind and plan a lockup and also the size of unlock to keep their project’s reputation so they have to face a sharp decline in the markets or the reaction doesn't affect their reputation. If an unlock of tokens can send positive signs among the investors it can also trigger distress selling, because larger number of tokens available in the market the larger the chances of selling resulting in a sharp price drop.

That's all dear Steemians, I would like to invite @abdullahw2, @josepha, and @weisser-rabe to tell us more about their own views on this crucial topic.