In the volatile world of cryptocurrency, significant token unlock events often precede market underperformance due to a sudden increase in supply overwhelming demand. This pattern appears to be holding true for Avalanche’s native token, AVAX, which has lagged behind the broader crypto market in anticipation of a substantial unlocking event, according to analysis from CoinDesk.
This week, the Avalanche network is bracing for the release of approximately $365 million worth of AVAX tokens from their vesting schedule, a move set to increase the digital asset’s circulating supply significantly. Token.Unlocks data reveals that this release will see a mix of 9.5 million AVAX tokens entering circulation, a 2.6% increase in total supply.
The distribution of these newly unlocked tokens is diverse: 4.5 million will go to team members, 2.25 million to strategic partners, 1.67 million to the ecosystem development foundation, and 1.13 million are designated for an airdrop to the community. This event marks a significant moment for Avalanche, with on-chain data indicating that about 58% of all AVAX tokens have now been unlocked.
Over the past week, AVAX’s performance has notably diverged from the broader crypto market’s upward trend. While the CoinDesk Market Index (CMI), representing 173 digital assets, saw a majority of its constituents gain in value, AVAX experienced a more than 3% drop. Similarly, the CoinDesk20 Index (CD20), tracking the largest and most liquid crypto assets, advanced by 6%, highlighting AVAX’s underperformance in contrast. Currently, AVAX trades at $38, marking a 23% decrease from its December peak.
Historical data from The Tie, a crypto analytics firm, suggests that such unlocking events typically result in price declines within two weeks, as the increased supply dilutes investor interest. Avalanche’s current situation underscores the delicate balance between token distribution strategies and market dynamics, emphasizing the challenges projects face in managing supply and demand.
