1) Lesson : What happens when a token has unlocks?**
1️⃣ **The Implications of Token Unlocking Schedules**
Token unlock events are pivotal moments for Crypto projects, significantly impacting a token's market performance 👀
For instance, a Crypto project with a tokenization plan that includes regular, high-percentage unlocks can lead to inflationary pressures on the token. This can hinder the token's price from climbing, as it introduces a steady flow of new sellers into the market.
ATOM token's market behavior during a non-bullish phase exemplifies this issue, where consistent unlocks have made it challenging for the token to gain upward traction 📝
**2️⃣ The Effects of Sudden Token Unlocks**
An impending token unlock can precipitate a rapid drop in value, as traders may attempt to anticipate the increase in supply by selling off their holdings early 📉
This was observed with the DYDX token last year though they changed their plan, where the anticipation of a significant unlock led to a considerable sell-off.
**3️⃣ Following Tokenomics: A Key to Informed Trading**
In traditional finance, 'following the money' is critical, and in Crypto, 'following the tokenomics' offers similar insights.
The recipients of the unlocked tokens largely determine the market's reaction.
Venture capitalists receiving tokens often sell a portion to de-risk their investments, especially if they acquired the tokens at pre-sale prices.
Developers receiving tokens may also create selling pressure, as they typically need to liquidate tokens for cash compensation. However, tokens going to secondary investors or core team members usually pose less risk, as they are more likely to hold onto their tokens 🧠
**4️⃣ Market Conditions and Unlock Events**
Market sentiment plays a crucial role during unlock periods. In a bear market, unlocks may pass with little fanfare, as the motivation to sell is low.
Conversely, in a bull market, an unlock can lead to abrupt sell-offs.
**5️⃣ Due Diligence in Crypto Investment**
