Bullish Token Unlocks Buck Bear Market Trend in Spur to Altcoin Season

This week Axie Infinity (AXS) surged by 40% in the lead up to $64 million worth of previously locked tokens being unleashed on the market. It took the audience by surprise, as an increase in supply generally results in a decrease in value, and also provides an opportunity for early-stage investors or project team members to wind down their initial investment.

However, axs is not the only one to do the opposite – The dydx cryptocurrency of decentralized derivatives has outperformed its peers with a 64% rebound this month despite a future token unlock on Feb. 2. And Aptos, the token that underlies the layer 1 blockchain that came out of Facebook's failed Diem project, has been a top performing asset since the turn of the year, surging by 283% despite a notable token unlock that took place on Jan. 12.

The magnitude of gains has rejuvenated the altcoin market as a whole, with CoinDesk's DeFi Index (DCF), which tracks the price of 43 cryptocurrencies related to decentralized finance, printing a 49.35% increase since Jan. 1, surpassing the rise of the Bitcoin index, which is up by 37.92% over the same period.

According to Unlocks Calendar, a website that tracks upcoming token unlocks, the trend is being caused by projects withholding positive news until sell pressure climaxes before a scheduled unlock.

"As we experience positive market momentum, teams with upcoming unlocks will release good news that they withheld for months when the market was dead," Unlocks Calendar tweeted on Jan. 14. "The objective would be to take advantage of positive market measures to inflate the price just prior to unblocking."

There is also a sophisticated trading element to the value increase. Historically, in the cases of the IMXAPE tokens late last year, token unlocks caused a period of downside price action. This encouraged traders to sell the chips before the event.

Based on the recent wave of short-term liquidations on taxes, it appears that this trade has become overcrowded, leaving it vulnerable to the other side due to a lack of liquidity. Market depth, which quantifies liquidity by working out how much capital is needed to move an asset in each direction, is currently at $49 million for a 2% move on bitcoin, whereas only $357,520 is needed to move AXS 2%, according to CoinMarketCap.

Market depth, which quantifies cash by calculating the capital required to move an asset in each direction, is currently 49 million dollars for a displacement of 2% on Bitcoin, considering that only $357,520 is required to move 2% axos, depending on the monetary capitalisation. This means that when short positions stack upstream of an occurrence, Smart traders can capitalize on thin order books by starting short-term compression by buying the asset and long-term.

The entire cryptocurrency market cap has risen by over $250 billion since Jan. 1 to $1.05 trillion, caused in part by a resurgence in the speculative altcoin market, a move commonly referred to as "alt season."