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Celestia’s TIA Braces for Price Volatility Amid $900M Token Unlock

Token unlocking events usually weigh on prices, but multi-month reaccumulation, crowded shorts and bullish crypto prices could lead to a surprise rally, analyst said.

The native cryptocurrency of data availability blockchain Celestia (TIA) braces for volatility due to its massive supply event on October 30, which will nearly double the number of tokens in circulation.

Some 175 million of previously locked-up TIA, 80% of the current supply, will be released on Wednesday, in the largest single unlocking event since the token was launched last October, Tokenomist data shows. That’s $920 million worth of tokens with prices slightly above $5 on exchanges.

Core contributors are scheduled to receive 58 million ($298 million) TIA tokens, per Tokenomist. 65 million ($332 million) tokens are allocated to early investors of the project’s series A and B funding rounds, with another 52 million ($268 million) tokens for seed investors.

Cryptocurrency projects often lock a part of the token’s supply and release it gradually to prevent early investors and insiders from selling in large quantities immediately after they get the allocations. When the tokens are unlocked, they become available to sell, and thus, such events are usually considered bearish; often they induce price drops. However, sometimes investors front-run and may sell before the unlocking happens.

In TIA’s case, prices have tumbled as much as 80% from the February peak of $21, and have consolidated in the $4-$6 range for multiple months. Meanwhile, funding rates for TIA perpetual futures sit in deeply negative territory, reaching a -90% annualized rate on crypto exchange Binance, CoinGlass data shows. This suggests traders are expecting declining prices or TIA holders are hedging their exposure leading into the unlock.

“There could be some pronounced effects,” David Shuttleworth, partner at Anagram, told CoinDesk, noting that the amount of tokens being unlocked is multiple times larger than the average daily trading volume between $50 million and $200 million over the past month. “The broader timing, however, is favorable,” he added, with bitcoin (BTC) trading near all-time highs and other majors including ether (ETH) and solana (SOL) also performing well.

Given the broad crypto market rally, the probability of TIA surprising traders with a rally following the unlock has increased, according to well-followed crypto analyst Will Clemente, founder of Reflexivity Research.

“This BTC price action has further slid the probability of Thursday’s TIA unlock being bearish towards ‘no,'” Clemente said in an X post.

“6 months of reaccumulation after 80% drawdown, ton of OTC volume, most widely telegraphed unlock in crypto history, 9 figs [figures] short, BTC nearing ATHs,” he added. Am long rn.”

Celestia’s TIA Posts Biggest Monthly Gain This Year Even as Impending $1.13B Token Unlock Spurs Hedging

TIA has outperformed the CoinDesk 20 Index by a wide margin.

TIA, the token of data-availability blockchain network Celestia, posted its best monthly gain this year, outperforming the broader market by a significant margin and confounding traders who’d positioned for a drop in the price as the result of a $1.13 billion token unlock due next month.

The market-beating 40% surge, the biggest since December 2023, contrasts with a 13% gain in the CoinDesk 20 Index, a measure of the largest, most liquid cryptocurrencies. It takes place against a background of some market participants seeking downside hedges due to concerns the massive token unlock due Oct. 31 will flood the market and depress prices.

Next month’s unlock will release 175.74 million TIA. That’s 16% of the cryptocurrency’s total supply and worth $1.13 billion, or 82% of the market capitalization, according to data source CryptoRank. Such large unlocks often create bearish pressures in the market.

“There has been an uptick in TIA hedging demand ahead of the Oct. 31 unlock – both via exchange-traded perpetuals, alongside OTC forward agreements with market makers/trading desks,” Jake Ostovskis, an over-the-counter trader at Wintermute, told CoinDesk in a Telegram chat.

Short squeeze

The bias for shorts, likely stemming from the hedging activity, might have led to a “short squeeze,” contributing to the TIA rally. A short squeeze happens when the asset price remains resilient, contrary to expectations, forcing bears to close their positions, which are bets that an asset will drop. That, in turn, puts upward pressure on prices.

“Traders tried to sell ahead of the [unlock] event from Julyish. I’d argue the squeeze has already happened,” Ostovskis said.

That’s evident from the recovery in funding rates tied to TIA perpetuals, which have rebounded to nearly zero, or neutral, having been in negative territory since July. As suggested by Ostovskis, rates below zero are a sign of traders taking bearish bets to protect against the downside price risk posed by the influx of so many tokens.

The recovery to neutral alongside the TIA price rally suggests shorts have been crowded out and might have inadvertently squeezed the price higher.

The $100 million fundraise

A $100 million fundraise announced this week likely gave bears another solid reason to exit shorts, adding upward momentum. The fresh round raised the foundation’s cash stash to $155 million, although the team did not detail how it plans to use the funds.

Some pseudonymous observers have suggested the fundraising was an OTC deal at a $3.4 billion valuation directly with the foundation, with the token sale priced at $3 and one-third of the same to be unlocked on Oct. 31.

According to Ostovskis, the impending unlock may have been priced in.

“Some commentators have seen their OTC sale sales as controversial, however, the result that a large cliff has been removed and enabling the pre-hedging unlocks has overall been positive, allowing the market to price in this event in advance,” Ostovskis noted.

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Large Crypto Token Unlocks Drive Prices Lower Within Two Weeks, Research Suggests

Unlocks are staggered releases of cryptocurrencies that had been frozen to prevent early investors or project team members from selling in large numbers.

Bir süredir kripto piyasasını takip ediyorsanız, muhtemelen token kilidinin açıldığını duymuşsunuzdur. Süreç, erken yatırımcıların veya proje ekibi üyelerinin çok sayıda satış yapmasını önlemek için dondurulmuş olan belirli miktarlarda kripto para birimlerinin kademeli olarak serbest bırakılmasını ifade eder.

Serbest likiditenin kilidini açar ve bazı gözlemciler yalnızca mevcut piyasa eğilimini vurguladıklarını söylese de, yaygın olarak düşüş eğilimi gösterirler.

Analitik firması The Tie tarafından yapılan yeni araştırma, madeni paraların ortalama olarak etkinlik öncesinde düştüğünü gösteriyor. Bununla birlikte, serbest kalan likidite ortalama günlük hacmin %100’ünden fazlasını temsil ettiğinde, fiyatlar hızlı bir şekilde toparlandı ve kilidi açtıktan sonraki iki hafta içinde daha da derine indi. Firma, 100’den fazla belirteci içeren 350.000’den fazla benzersiz kilit açma olayıyla ilgili bir çalışma yürüttü.

“In cases where the unlock represented more than 100% of the average daily volume, prices tended to rebound faster, albeit for a brief period. This could be attributed to traders feeling relieved that the unlock did not flood the market with new tokens immediately,” Lawrence Lewitinn, the director of content at The Tie, wrote in Wednesday’s newsletter.

“Nonetheless, within two weeks, prices of tokens facing such significant unlocks fell below their initial levels at the time of the unlock,” he wrote. “This may suggest that holders preferred to wait a few days before selling into the market.”

The Tie’s research also showed an exponential increase in trading volumes in coins that saw large unlocks.