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In the bustling world of cryptocurrencies, Avalanche's native token, AVAX, has recently found itself in a tough spot.
While the broader market has been enjoying positive gains, AVAX has been struggling to keep up, facing a notable decline in value. This decline comes at a crucial time as the token approaches a significant unlocking event, set to unleash a substantial number of previously locked-up tokens into the market.
Over the past week, AVAX has experienced a decline of more than 3%, contrasting sharply with the positive performance witnessed across most digital assets. Among the 173 constituents of the CoinDesk Market Index (CMI), 148 saw their prices soar during this period.
Meanwhile, the CoinDesk20 Index (CD20), which closely tracks the largest and most liquid crypto assets, recorded a robust 6% increase in value over the same timeframe. In comparison, AVAX's current trading price of $38 reflects a notable 23% drop from its peak in December.
Avalanche Unlock
This underwhelming performance has coincided with the looming unlocking event involving approximately $365 million worth of AVAX tokens.
Scheduled to take place on Thursday, this event will see the release of 9.5 million previously locked-up AVAX tokens, thereby increasing the circulating supply by around 2.6%. Data from Token provide detailed insights into the distribution of these unlocked tokens.
According to CoinDesk, unlocks reveal that 4.5 million tokens are earmarked for team members, 2.25 million for strategic partners, 1.67 million for the ecosystem development foundation, and 1.13 million set aside for airdrops. According to on-chain data, about 58% of all AVAX tokens have now been unlocked.
Side Effects of Token Unlocks
The impact of unlocking events like this extends beyond the mere increase in token supply.
According to Coin Codex, such events signify the release of coins that were previously held in a vesting period, including those allocated to early investors.
Research conducted by crypto analytics firm The Tie suggests that such events often coincide with price declines within a two-week timeframe. This occurs as the increased supply outpaces the demand from investors, exerting downward pressure on the asset's price.
As AVAX navigates through this unlocking event and its aftermath, market observers will closely monitor its price dynamics and the broader implications for the Avalanche network and its ecosystem stakeholders.
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