Imagine you own a slice of a pizza. Now imagine the restaurant has a schedule for handing out nine more slices of the same pizza, to people who paid a fraction of what you did, starting next month.
That schedule is a token unlock. And if you don't know when it is, you're the last person at the table to find out.
The short version
- Vesting locks up part of a coin's supply for a set time, usually for the team, early investors and the treasury.
- Unlocks release it. That new supply often lands in the hands of people who paid very little and may want to sell.
- One study of 16,000+ unlocks found about 90% put downward pressure on the price, with selling often starting about a month early.
- It's common. In a CoinGecko study, 21.3% of the top 300 coins had more than half their supply still to come.
- The check: market cap vs fully diluted value, then the unlock calendar. Takes a minute.
How vesting works
Vesting means locking a set share of a token's supply for a period, or until conditions are met. CoinGecko describes three common shapes (CoinGecko):
- Linear: an even trickle, say the same amount every month.
- Graded: irregular chunks on a set timetable.
- Cliff: nothing at all until a date, then a big release.
Cliffs are the ones to watch. A year of silence, then a wall of supply in a single day.
What happens when tokens unlock
Market maker Keyrock looked at more than 16,000 unlock events across 40 tokens and found that about 90% created negative price pressure. Prices tended to start sliding about 30 days before the unlock, as traders positioned early. Team unlocks were the worst, averaging about a 25% hit, while unlocks for ecosystem development averaged slightly positive (Keyrock).
Keyrock is a trading firm rather than an independent academic, so treat the exact figures as one study. The direction makes sense, though. Who gets the tokens matters as much as how many.
How common is it?
Very. CoinGecko found that 21.3% of the top 300 coins were "low float", meaning their market cap was less than half their fully diluted value. In other words, more than half their supply was still to come. Most were young: 54 of those 64 had launched in the previous four years (CoinGecko research).
The 60-second check
- Divide market cap by fully diluted value. Under 0.5 means more than half the supply is still locked. Here's the full explanation.
- Find the unlock schedule. Look in the project's documentation for its token allocation and vesting terms.
- Note the next big date and who receives the tokens: team, investors or the community.
- Compare the unlock size with daily trading volume. An unlock worth weeks of normal volume is a lot of potential selling.
Questions people ask
What is a token unlock in crypto?
A token unlock is when previously locked tokens, often held by a project's team, early investors or treasury, become free to trade under the project's vesting schedule, adding to the circulating supply.
Do token unlocks make prices go down?
Often. A Keyrock study of more than 16,000 unlock events found about 90% created negative price pressure, with prices tending to start falling about 30 days before the unlock and team unlocks hurting most.
What is a vesting cliff?
A cliff is a vesting schedule where nothing is released until a set date, after which a large amount unlocks at once. Linear schedules release tokens evenly instead.
How can I check when a token unlocks?
Compare its market cap with its fully diluted value to see how much supply is still locked, then read the project's published token allocation and vesting schedule for the dates and recipients of upcoming unlocks.