One of the most dangerous things you may face in a token you are invested in is the unlocks, or what is known as token unlocks.
In this article, we will delve into explaining this term and how you can discover through Binance whether your token is at risk of unlocks.
What are token unlocks?
Most cryptocurrency economics rely on releasing a portion of the total token supply upon listing, with a certain percentage reserved to be unlocked in phases later.
You often find this type of economics in projects that have utility or sustainability in the market, unlike meme coins.
The idea of reserving a portion of the token at launch is to incentivize the project team and investors to continue working and developing the project, so their interests align with the project's continuation, rather than dumping the token and abandoning the project after launch.
This was the main idea behind cryptocurrency unlocks, but what has happened over the past years is that project valuations, especially in investment rounds, are at very low prices, making investors profit by multiples even if a year has passed since the token's launch, pushing them to dump the token upon unlocking.
Token unlocks can also affect token inflation, as the influx of tokens post-unlock increases the supply, leading to two pathways:
Increased demand to balance the additional supply, which typically happens with large tokens in the market.
Stable demand at the same level, in which case the token's price valuation decreases due to the increased supply.
Why should you study the token unlock schedule?
Studying the unlock schedule of the tokens you invest in is crucial to avoid losses.
And here lies the problem!
Although most projects clarify the tokenomics in their whitepapers, they are subject to change, so you will need to keep a close watch on the project's governance and token developments.
Therefore, some tools have emerged that track token unlock data, but they can sometimes be inaccurate and at times, costly.
But what many don’t know is that Binance has a comprehensive service that provides unlock data in precise detail, due to its direct communication with all the listed cryptocurrency projects on the platform.
How does Binance study the tokenomics of cryptocurrencies?
From the Binance homepage, look for Token Unlocks.
A page will show you all the tokens listed on Binance, where you can browse upcoming unlocks and see how many tokens will be injected into the market, along with a countdown to the unlock time.
You can also search for your token to see its unlock schedule, giving you a clearer picture of inflation expectations in the total supply and its impact on the token's price.
