Will TIA's massive unlocking cause the price to drop?

Author: 1912212.eth, Foresight News

The massive unlocking of tokens always raises significant concerns in the market.

The modular leader Celestia's token TIA is set to unlock 175.74 million tokens on October 31. At a price of $6 per token, the total unlocking value exceeds $1 billion. This unlocking amount accounts for 16.3% of its total supply and 80.07% of the current circulating supply. As of the time of writing, the price of TIA has rebounded to above $6, currently priced at $6.16, with a daily increase of about 3%.

Additionally, among the unlocked tokens, the shares of seed round, Series A, and Series B investors amount to 117.38 million tokens, which is quite substantial.

Such a large unlocking has attracted widespread attention in the market. Will VCs unlock and sell immediately? Will there be a significant price correction? These have become common concerns in the market.

Recent Developments of Celestia

Since Celestia pioneered the concept of modularity, it has garnered significant attention and discussion in the market. Celestia's modular infrastructure, designed specifically for data availability networks (DA), can reduce data costs by 99.9% compared to Ethereum's mainnet, which is currently the largest DA layer in the industry.

According to Blockwork Research data, by mid-September, its data publishing ratio had reached 57%, with costs amounting to only $243, which is 1% of Ethereum's mainnet fees. Since the launch of its autonomous network, Celestia has supported the deployment of over 20 Rollups.

As of October this year, Celestia's maximum throughput is currently 2MB/12 seconds, or 0.167MB/s. For this reason, recently, Celestia's core development community announced a roadmap aimed at significantly increasing data throughput, targeting 1GB.

Early Announcement of Financing

Before the large unlocking of tokens, the project team often announces a roadmap and financing news, which can help stabilize the token price.

Celestia's initial fundraising journey was not smooth, facing multiple rejections from investors in 2019. After establishing a foothold with the modular narrative and protocol, in October 2022, Celestia completed a $55 million financing round. In September 2024, the Celestia Foundation completed another $100 million financing round, with several prominent institutions participating. Following the announcement of the financing news, TIA surged by 24% in one day, reaching above $6.5.

However, just as the community was celebrating, investor Sisyphus revealed that this financing was actually an over-the-counter deal reached by the foundation with several institutions months ago, with a valuation of $3.5 billion at that time. These token shares might be unlocked in October. Sisyphus also added that if institutions could sell all unlocked assets at $7.5, they would break even.

The brief excitement quickly returned to silence.

Negative Impact May Be Digested

Since the modularity boom combined with the overall market surge, TIA has risen from around $2 at the end of last year to above $21. It then continued to decline, dropping to below $4, and has now fallen back to around $6.

Generally speaking, large unlockings, especially those involving significant shares from teams and investors, tend to have adverse effects. Community participants, in the so-called anti-VC wave, naturally believe that once unlocked, VCs will sell off without mercy.

News of the massive token unlocking typically begins to spread widely about a month in advance, and within two to three weeks, the market starts to prepare for this news. Hesitant funds often begin to adjust their positions in the weeks leading up to the unlocking to prevent significant volatility.

Messari pointed out in a research report that unlocking more than 5% of the circulating supply can significantly impact token performance, and that token prices tend to perform poorly within 7 days before and after the unlocking event.

So how will this TIA unlocking play out?

Notable bull investor Placeholder partner Chris Burniske once analyzed TIA in a tweet, suggesting that some investors might regret not buying below $5 when TIA rises. Chris made a large purchase when SOL dropped below $10 at the end of 2022 and gained fame for his accurate market predictions.

In a lengthy tweet, Chris stated that the negative impact of TIA's large unlocking has been severely exaggerated.

• Celestia's ecosystem continues to develop, with passionate and ideologically diverse developers; it reminds him of early Bitcoin, Ethereum, and Solana.
• Those so-called "evil VCs" who receive unlocked tokens are unlikely to sell off everything in October, as they see the ecosystem being built by the team is continuously growing, and many of TIA's biggest supporters are not as focused on short-term gains as many believe.
• When the unlocking occurs, the market may realize that the selling pressure is far less than the expectations for these airdrops; if the bulls have not been liquidated beforehand, then the airdrop could lead to liquidations.
• Those marginalized and hesitant buyers worried about the unlocking may begin to take "buy" actions after seeing positive price movements, as uncertainty decreases.

Chris also mentioned that in past cycles, SOL unlocked 80% of its total supply in December 2020. Although it experienced a correction afterward, SOL surged over 100 times in 2021. However, some have expressed skepticism, with Blankless founder David Hoffman commenting, "It's uncertain whether it's really appropriate to compare with the best-performing assets of 2021."

Currently, whether TIA can replicate SOL's rise remains to be seen. However, if the price does not experience a significant drop after the unlocking and stabilizes within a range, it will undoubtedly have a positive impact on future trends.

TIA Staking Rewards May Alleviate Selling Pressure

Currently, on mainstream exchanges, TIA's annualized yield for flexible savings on Binance is as high as 14.36%, while it is 11% on Bybit, and around 20% on OKX.

With relatively good off-chain returns, what about on-chain? Taking Stride as an example, its annualized yield reaches 9.45%, while the Keplr wallet achieves 10.61%. The high annualized rates, combined with the market's general expectation that we are at the beginning of a new bull market, may lead some funds to choose to stake and wait.

It is worth mentioning that many previous modular concept projects have distributed airdrops to TIA's on-chain stakers. If history repeats itself, it may attract some staking funds again.

Recent Performance of Other Large Token Unlockings

When we are uncertain about what will happen, looking back at past events can be a useful approach.

The popular public chain SUI unlocked approximately 64.19 million tokens on October 1, valued at around $120 million. Among the unlocked tokens, the amount unlocked by investors reached 39.16 million tokens, accounting for more than half of the total unlocking.

However, SUI did not experience significant volatility, dropping from $1.93 to $1.65 on that day, with a decline of only 0.97%. Although there was some subsequent correction, the price trend remained extremely strong, reaching a historical high of $2.368 a week after the unlocking, on October 13.

Another MOVE system public chain, APT, also unlocked 11.31 million tokens on October 12, valued at approximately $100 million, with investors unlocking 2.81 million tokens.

On the day of the unlocking, the market price not only did not drop but surged by 16.55%, briefly reaching around $10. On October 22, APT's price jumped above $11, setting a new high since May 2024.

Even the long-suffering layer 2 token ARB saw a slight increase after its unlocking, without the so-called significant drop. ARB unlocked 92.65 million tokens on October 16, valued at approximately $49.4 million.

On the day of the unlocking and the following day, ARB experienced a total decline of about 3.7%, dropping from $0.58 to $0.54, but quickly rebounded with three consecutive increases, pushing the price above $0.6.

Conclusion

The performance of tokens after large unlockings is often influenced by a variety of factors, such as the sector, unlocking shares, ecosystem development, project progress, and community atmosphere. Of course, the overall market trend, whether upward or downward, also significantly impacts prices. During bear markets, weak buying can lead to substantial selling pressure from large unlockings. However, once the market returns to a bull phase, examples of token unlockings leading to surges are not uncommon. Investors need to analyze and judge comprehensively to seize market opportunities.