Recent data highlights that a considerable fraction of the top 300 cryptocurrencies are approaching significant unlocking events, which could potentially destabilize their market values. The analysis draws attention to the fact that about 20% of these cryptocurrencies still have a substantial amount of their supply locked, meaning it has not been released into circulation yet. Such conditions pose a challenge for investors planning long-term strategies.
Exploring the Ratio of Market Value to FDV
The study, utilizing data from CoinGecko as of May 8, 2024, focused specifically on non-stablecoin and non-wrapped altcoins. It categorized cryptocurrencies based on their market value relative to their fully diluted valuation (FDV). Cryptos with a circulating supply to maximum supply ratio below 0.49 were deemed to have significant upcoming unlocks, indicative of a potentially volatile phase as more tokens enter circulation.
Implications of High Unlock Ratios
The research pinpointed several cryptocurrencies with exceptionally low circulating to total supply ratios, such as Worldcoin, Cheelee, Starknet, and Saga. These findings suggest that as these cryptocurrencies move towards diluting their supply, sharp price adjustments could occur. For example, DYDX, with less than 10% of its tokens initially circulating, saw its price reach $30. However, for its price to return to previous highs, a significant increase in market value would be necessary, a challenging feat given current market conditions.
Key Insights for Cryptocurrency Holders
- Monitoring unlock schedules is critical for anticipating market movements.
- Setting investment targets based on maximum supply can provide a more realistic expectation of future prices.
- Older cryptocurrencies with high FDV ratios are less likely to undergo severe price volatility due to unlocks.
In conclusion, the cryptocurrency market is currently witnessing a phase where upcoming unlocking events could potentially lead to significant price volatility, particularly for altcoins with substantial amounts yet to circulate. Investors are advised to keep a close watch on these developments and adjust their investment strategies accordingly to mitigate potential risks.