- AVAX faces underperformance in the face of a $365 million unlocking event, increasing token supply by 2.6%.
- Historically, significant unlocking events lead to price declines as increased supply exceeds investor demand.
The fact that AVAX, the native cryptocurrency of the Avalanche network, is underperforming most digital assets in the face of a token unlocking event valued at $365 million this week has significant implications.
This event will increase the supply of tokens in the market, which historically has resulted in a price decline due to increased supply outstripping investor demand. AVAX has experienced a drop of over 3% in the last week, in contrast to most cryptocurrencies that have seen price increases.
This underperformance comes just as approximately 9.5 million previously blocked AVAX tokens will be released , increasing the circulating supply of the asset by 2.6%.
The distribution of the unlocked tokens will include transfers to team members, strategic partners, the ecosystem development foundation and an airdrop, totaling 58% of all AVAX tokens already released .
Token unlocks typically translate into an increase in the supply of the asset, releasing coins previously restricted for a vesting period, including those allocated to early investors.
Large unlocking events generally lead to price declines within two weeks as increased supply outstrips investor demand for the asset, according to a report by crypto analysis firm The Tie last year.
This suggests that AVAX could face additional pressures in the near term, affecting its price and possibly its market positioning against other cryptocurrencies.
