The upcoming unlock for Aptos has woken up the bears as the token seemed to struggle on its charts. According to data source TokenUnlocks, the layer-1 (L1) protocol will release 20 million Aptos ($APT) tokens in November.
The month will see Aptos’ first team and investor unlock. It is worth $103million at the token’s current market price. This equalled more than 8.5% of Aptos’ circulating supply of 235.02 million.
Token unlocks refer to the release of a certain amount of assets that were previously locked or restricted from circulation in the crypto market. This has the potential to significantly impact market liquidity. An influx of previously locked ones into the open market increases the liquidity of that particular cryptocurrency, thereby resulting in higher trading volumes which could influence market dynamics and price volatility.
Cryptocurrency projects often lock their tokens in order to keep the early investors and project team members who are the big bag holders from liquidating their holdings all at once. As mentioned before, this could affect its market value.
Research firm The Tie has postulated that the APT’s November unlock will end up freeing significant liquidity. In its weekly newsletter dated 13 September, it said that the collective 20 million $APT, which is equivalent to $106m, to be unlocked equates to 112% of the average daily trading volume over the prior 30 days.
The Tie added: “These unlocks will take place on a monthly basis and will coincide with monthly staking reward unlocks (5.83 million APT or 32% of the daily average volume, set to increase to 6.15 million APT in December). Additionally, since last year, 4.62 million APT have been unlocked monthly for community and foundation purposes.”
Back in July, a research published by the firm also suggested that large crypto token unlocks drive prices lower within two weeks. This was observed in a study of over 350,000 unique unlock events involving more than 100 tokens. Here, it was noted that coins, on average, declined in the lead-up to the event. When the liquidity freed up represented more than 100% of the average daily volume, prices quickly recovered. However, this is often followed by a deeper fall within two weeks following the unlock.
The prices rebounding for a brief period could be attributed to traders feeling relieved that the unlock did not flood the market with new tokens immediately, wrote the director of content at The Tie, Lawrence Lewitinn, in one of the firm’s newsletters.
Nonetheless: “……within two weeks, prices of tokens facing such significant unlocks fell below their initial levels at the time of the unlock. This may suggest that holders preferred to wait a few days before selling into the market.”
As per the data from derivatives market tied to $APT, traders were growing bearish on the crypto. At present, open-interest-weighted funding rates were also at their most negative since February. Here, a negative rate implies that shorts are paying longs to keep their bearish bets open.
On Wednesday, the number of active contracts, which represent the open interest for the token, rose to 5.33 million $APT. This was noted as the highest since 17 August. However, the uptick in open interest alongside negative funding rates indicated that leverage is skewed to the bearish side.
As of press time, $APT was seen trading in the red too, down by almost 7% in the last seven days. It is currently changing hands for $5.17.
