What Is a Token Unlock

Cryptocurrency price movements often seem unpredictable, but in some cases, they are driven by a certain process, known as token unlock. This is about planned releases of previously locked or reserved tokens, which significantly influences supply and overall market sentiment. In this article, we talk in detail about the way token unlock works and affects crypto price and share the method of tracking it so that you can be ready for profitable transactions.

How Does Token Unlock Work?

Once again: token unlock is the planned “release” of crypto tokens being previously restricted in circulation. These tokens are often distributed among the development team members, investors or community members who support the project in the early stages of project funding. Therefore, lock-up maintains long-term commitment to the project and also helps prevent rapid sell-offs.

Upon the unlock date, part or all of the tokens become available for use — they can be bought, sold, or traded. The unlocking process increases the circulating tokens’ supply, affecting their market price, especially when large amounts are released. The fewer tokens are unlocked, the higher the demand for them and the price increase, and vice versa. This mechanism is an excellent tool for new projects, as it both rewards those who invested in it at an early stage and maintains price stability.

Token Unlock’s Impact on Price of the Asset

Now, let's take a look at the most important aspect — how token unlock affects asset prices. This information helps you plan your asset management wisely.

The unlock mechanism is primarily a protective tool, as it allows the price of cryptocurrencies to be controlled by limiting issuance. However, since unlock occurs gradually, the assets’ prices usually fall. To elaborate, the price drops due to the following events:

• Increased supply: this is the very first effect of token issuance, diluting the tokens’ value and causing them to fall to a minimum.

• Mass sell-off: team members or early investors sell unlocked tokens simultaneously to lock in profits; this increases supply and leads to a price drop.

• Mistrust of the asset: upcoming large unlocks sometimes cause fear and uncertainty among token holders, which weakens confidence in the short term.

At the same time, the price may rise significantly amid volatility. The fact is that traders often anticipate unlocks, and this may lead to price fluctuations several days or weeks before the scheduled date. Then a possibility appears that the asset price will reach its maximum during this period, so if you intend to purchase a token favorably for yourself, it’s worth using technical indicators and charts.

Types of Unlocks

There are several types of token unlock that will help you better understand the process. We describe the main ones below:

• Type 1: Cliff unlock. The simplest method, meaning all tokens are released at the end of a planned lock-up period.

• Type 2: Linear vesting. This is about unlocking tokens in equal parts over time.

• Type 3: Periodic vesting. In this case, tokens are released in certain batches at specific intervals (e.g., monthly).

• Type 4: Performance-based unlock. Tokens are unlocked only when a project milestones or its goals are achieved.

• Type 5: Event-based unlock. This is when tokens are released, depending on external events, such as listing on an exchange, protocol launch or Bitcoin mining, in which supply increases as more coins are mined.

• Type 6: Customized unlock schedule. This is a hybrid model combining several types of unlock, adapted to the project’s needs.

Token Unlock Vs. Vesting

We mentioned the word “vesting”, which is closely related to “unlock”. Now, let's look at these two concepts next to each other in the comparative table below.

As you can see, the main difference between unlock and vesting is their nature: unlock is a single action, while vesting is a continuous process. If vesting has already been determined, then unlock can and should be monitored to plan your financial transactions wisely.

How to Track Upcoming Unlocks?

To plan your investment strategy, it’s important to track token unlocks. You can do this using specialized platforms: the most popular include TokenUnlocks, Messari, and CoinMarketCap. They provide detailed calendars and metrics, including unlock amounts, percentages, and even recipient categories (e.g., team or investors). For convenience, you can set up alerts or dashboards, which will notify you about upcoming supply increases.

For a more in-depth analysis, we recommend combining the tools on these platforms with data on daily trading volumes and on-chain activity. This analysis will help you determine the degree of the unlock impact on the asset's price. To track daily numerical changes in an asset, you can refer to our page.

Do you have any questions about token unlock? Ask them in the comments to learn more!