Follow along as DreamingCrypto uncovers the living legend of the cryptoverse. Spellbound standards awaken as adventurous startups traverse the cybernetic wilds. Venture capital covens fuel innovation’s unexplored territories and the Web3 oracle foretells landscapes still to be explored. Written by Lim Qiaoyun. Lim is an accomplished Web3 editor. She takes retail investors behind the scenes of VC token unlocks and provides actionable strategies that aspiring tokenomics geniuses can take straight from the pros. Forget about needing billions – armed with the right expertise, you too can trade these market events like a pro-day trader.

Understanding Token Unlocks: The Basics

Token unlocks are widely publicized, pre-scheduled events, when previously locked tokens are released into circulation. These tokens are usually in the hands of venture capitalists (VCs), team members or advisors. Since it increases the supply of the token, the release of these tokens can have a large negative effect on a token’s price. So, at the very least, knowing this stuff is a must for any crypto investor.

The terms of the vesting schedule are key pieces of information. It outlines the schedule of when and how tokens will be released into circulation. A “cliff” describes an initial period of zero token release, and then a subsequent ramp up of releasing tokens over time. Knowing the vesting period and cliff can help retail investors anticipate potential selling pressure and plan their investment strategies accordingly. Unlocking more than 20% of circulating supply all at once is bound to introduce immense selling pressure and volatility.

Resources such as Token Unlocks are particularly useful for gaining insight into upcoming unlock events. These platforms track and aggregate data on token unlocks, offering a calendar of events and details about the tokens being released. By keeping an eye on these occurrences, investors can get a leg up and make much smarter, better informed decisions.

Strategies Inspired by VCs: How to Play the Unlock Game

While retail investors don't have the same resources as VCs, they can still adopt strategies inspired by them to navigate token unlock events. These strategies are all focused on marketing intelligence, risk management and data-driven decision making.

Monitoring Price Trends

Observing price behavior in the 30 days leading up to and after unlock events yields some illuminating nuances. Many times the market will predict unlock events, causing price shifts prior to the event release. Knowing these trends first will allow retail investors to spot these trends and know the best entry and exit points. For these exits, the optimal time is 30 days prior to a major unlock, when hedging or market pre-reactions usually start to occur. The best window to get in at is 14 days after a huge unlock. By then volatility has calmed down, and hedging strategies have probably been unwound.

Staggered Selling: A Mitigation Tactic

Though not consistently mentioned, the idea of staggered selling is a very important one. Or, as one example, releasing a large percentage of tokens at once can easily flood the market and depress prices. Thus, phasing the release over time can reduce this risk. Often project teams and investors take this approach themselves, as a way to avoid negative market impact.

Hedging and Mitigation Strategies

Other project teams and investors employ sophisticated options strategies to help manage the fund and minimize the need to create selling pressure. Pre-hedging is when an oil company enters into derivative contracts to pre-determine a selling price, thereby minimizing the adverse effects of unlock events. Expiring options VCs could lock in their exit price months before the unlock by entering derivative contracts. It’s a smart strategy for minimizing their risk. Like most firms, most institutional investors start hedging 1–2 weeks before the unlock. Some are even scheduling a month ahead, based on the scale of the unlock. Massive unlocks tend to go to highly sophisticated recipients who use professional market makers to hedge their exposure. Since 2021, many advanced options strategies have surged in popularity outside the investor class. More project teams are tapping into these strategies to create ongoing revenue streams and take better control of their money.

DYOR and Risk Management: The Golden Rules

When navigating token unlocks, it’s important to go in with a solid rule of DYOR and risk management. Knowing the details of every project and the risks that unlock events pose is critical to success.

Understanding DYOR Token Unlocks

DYOR has four major categories of unlock. These labels include Community, Team, Seed, Treasury, Reserve Allocation (Backers), Future Employees, Pre-Seed, Advisors, Reserve, Exchange Liquidity, Public, DEX Liquidity, Strategic, and Free Float. Our table provides the total, unlocked and locked tokens available for each category. That is to say, out of Community tokens for instance, only 2.16% are currently unlocked as opposed to 15.8% being locked. The DYOR token is largely supply capped at 100,000,000,000 and has a circulating supply of 0. The market cap of DYOR is $0.00, so the fully diluted market cap of DYOR is $43,476.54.

Essential Risk Management Tips

  • Start Small: Only invest what you can afford to lose.
  • Diversify: Don't put all your eggs in one basket. Spread your investments across different tokens and projects.
  • Set Stop-Loss Orders: Protect your capital by setting stop-loss orders to limit potential losses.
  • Stay Informed: Continuously monitor market trends and news related to your investments.

By adhering to these principles, retail investors may be empowered to approach token unlock events with more certainty and conviction. This knowledge creates spaces for lucrative prospects. As always, the cryptoverse rewards those who do their homework and come prepared. Follow the signs, heed the runes, and catch the swell of this new decentralized epoch.