OP token unlock
Optimism (OP), a Layer 2 (L2) solution for Ethereum (ETH), and the high-speed L1 blockchain Sui Network (SUI) will soon have a “Token Unlock” that unlocks tokens.
As a result, the number of OP and SUI tokens in circulation will increase significantly. Especially in the case of Optimism, the planned number of tokens in circulation after unlocking is expected to double from the current level.
A token unlock is an event in which a token that has been locked up for a certain period of time is re-circulated in the market. This approach is usually taken to curb the rapid increase in token supply to the market.
As the supply of tokens increases, the price of the token tends to decrease. In fact, according to TokenUnlocks, a data analysis company, the token price can drop by up to 15% before unlocking, and the price after unlocking is often flat.
Source: Token unlocks
According to Token Unlocks, Optimism will release 387 million OP (approximately 824 million yen) of tokens on May 31, which will be distributed to core contributors and investors. As a result, the number of Optimism tokens in circulation is expected to increase significantly from the current 300 million OP to 670 million OP.
Optimism is rolling out a major upgrade, Bedrock, in a week, but OP token prices have fallen 6% over the past week, from $1.64 to $1.47.
connection:Optimism, big upgrade “Bedrock” scheduled for June
SUI token unlock
Source: Token unlocks
On the other hand, Sui plans to unlock 61 million SUI (equivalent to about 8.6 billion yen) on June 4, increasing the number of tokens in circulation by 13%. Additionally, token releases of this magnitude will occur almost weekly, with token distribution to early contributors and developer MystenLabs beginning in November 2023. As a result, the current SUI distribution volume of 555 million SUI is expected to quadruple to 2.18 billion SUI.
However, Scimitar Capital analyst Alex points out that some of the SUI tokens distributed to early contributors will be provided as airdrops to general users, and some will be sent to the Sui Foundation. there is
What is airdrop
A method of distributing specific tokens free of charge to users who meet certain criteria. This is often done to raise the profile of the project and involve more users.
▶️Cryptocurrency Glossary
Alex also notes that users who receive airdrops are retail investors who are sensitive to market trends and whose trading behavior can change rapidly. They react quickly to new market information, which can result in price volatility.
The key here is to assess the increase in supply and the upgrades, partnerships and new news that project teams and investors are preparing to counter this increase.
Alex’s comments show the point of view that we should focus not only on the increase in token supply itself, but also on strategies and efforts to minimize its impact. In recent years, there have been an increasing number of cases where prices have risen despite increased supply due to token unlocks, and unlock events are sometimes interpreted as bullish signals to the market.
Some project teams may also adopt a strategy of releasing market-stimulating news prior to unlocks, and trying to push prices higher when selling pressure from unlocks peaks. In addition, many traders take short positions in anticipation of price drops due to token unlocking, but some traders anticipate this move and buy more assets, which may cause a short squeeze.
A short squeeze is a phenomenon in which traders with a large number of short positions buy back the asset all at once, causing the price to rise sharply, causing the price of the asset to rise further and the market to turn bullish. Combined, it is important to understand that token unlocking can trigger complex market dynamics beyond a simple supply increase.
connection:Optimism, big upgrade “Bedrock” scheduled for June
