As with all assets the price of a crypto Is determined by supply and demand and Besides block rewards staking rewards And inflation one of the biggest sources Of Supply in crypto is selling by early Investors according to the first annual Report by token unlocks over 100 billion Dollars of crypto will be vested to Early investors in the next few years The resulting cell pressure could crash The price of these cryptos that's why Today I'm going to summarize token Unlocks's first annual report reveal Which coins and tokens will see the most Cell pressure and tell you how this Could affect the crypto Market Foreign Words quote token unlocks was created to Address the transparency issues present In many crypto projects these projects May not adhere to vesting schedules Outlined in their white papers and may Not readily provide access to project Data and never forget that folks Now the authors go on to explain that This first annual report covers a few Token unlocks from 2022 and provides Some insight into what impact token Unlocks could have in 2023 the authors Stress that nothing in this report is Financial advice it's purely educational Content just like this video as it Happens Now the second section of the report
Provides an explanation of what token Unlocks are token unlocks or vesting Schedules tell you when the initial Supply of a coin or token will be Released and to which category of Investor There are many different types of Vesting methods though the most Important are linear and Cliff vesting As the name suggests linear vesting is Where the coin or token is unlocked Gradually over time typically every time A new block is added to the blockchain By contrast a cliff vesting schedule is Where a fixed supply of the coin or Token is unlocked at a predetermined Date for example 10 on the 25th of December Now linear vesting schedules are often Better for the price action of a coin or Token because any selling by early Investors or the team is spread out over A longer period conversely Cliff vesting Schedules often result in lots of Short-term cell pressure which can crash The price of the coin or token in Question that said sometimes Cliff Vesting has no impact on price an Example that comes to mind is Solana Whose Soul coin essentially had a single Vesting Cliff the entire initial Supply Basically unlocked in January 2021 but Sole's price was somehow fine More about that mystery in the
Description anyways the third section of The report gives a recap of what Happened to the crypto Market in 2022 Obviously the authors talk about how the Market crashed and discuss key events Like terror's collapse and ftx's Bankruptcy however they argue that token Unlocks also played a role in the crash The authors reveal that the token Unlocks platform launched in July last Year and currently tracks vesting Schedules for over 140 crypto projects And protocols with a total market cap of 23 billion dollars most of these Projects are in the D5 blockchain Presumably layer ones Dao and metaverse Categories the authors admit that 23 Billion is a drop in the bucket compared To crypto's Total market cap but they Seem to imply that the team plans on Eventually covering them all If I understand correctly the authors Note that they only analyze token Unlocks of 38 of the 140 cryptos for This section of the report they also Explain that the total value of the Vesting coins and tokens for these 38 Projects and protocols fell by 90 from Over 140 billion dollars to just 14 Billion dollars this was of course Primarily due to the decline in prices What's odd is that the authors don't Specify which cryptos they're talking About here in any case they estimate
That 23 and a half billion dollars of The 140 billion market cap entered Circulation in 2022. I.E this is the Value of the coins and tokens that were Unlocked they estimate that more than 70 Of this 23.5 billion dollars of unlocked Coins and tokens was sold on the open Market Not surprisingly the authors found that More than 60 of the unlocked coins and Tokens had Cliff vesting schedules Whereas fewer than 40 percent had linear Vesting schedules this underscores the Fact that coins and tokens with Cliff Vesting experience more cell pressure Than those with linear vesting I should Note that there is more to tokenomics Than vesting and unlocks and you can Learn about the other tokenomic factors Using the link in the description Now the fourth section of the report Focuses on how exactly crypto projects And protocols vest their coins and Tokens the authors say there are three Main methods vesting from a regular Wallet vesting from multi-sig wallet and Vesting using smart contracts This time the authors analyzed 31 Cryptos as you can see the majority of Crypto projects and protocols used smart Contracts some used a combination of Wallets and smart contracts and a few Used wallets only multi-sig wallets were The least popular option
This makes sense given that they're not Always easy to set up or send Transactions from now this infographic Shows you the full list of crypto Projects and protocols that the authors Analyzed for this section and I must say That it is fascinating The orange lines are for smart contract Addresses the red lines are for Multi-sig wallets and the blue lines are For regular wallets now the three Cryptos that stick out the most are the Sandbox which is the only project on the List that uses multi-sik wallets for Vesting apecoin and Lido Dow which are The only two projects on the list that Use regular wallets for vesting the Authors note that eight coin uses over 150 wallets for its vesting I must admit That this is a bit concerning because Vesting from a regular wallet means that Whoever owns the wallet can move the Coins or tokens in that wallet whenever They want This is harder to do with multisigs and Impossible to do with smart contracts Because allocations are predetermined Good thing most crypto projects are Using smart contracts if you want Evidence of the possibility that using a Regular wallet for vesting results in More cell pressure look no further than The next two charts in the report it Appears that vesting from regular
Wallets was much larger than smart Contracts in 2022 in percentage terms Though this could just be a coincidence But um probably not Now the fifth section of the report Breaks down how vested coins and tokens Are distributed The author's group coin or token Recipients into four categories the team The treasury early investors and the Community The authors analyzed 44 cryptos for this Section and a list is again provided as With the infographic of wallets used for Vesting the infographic for vesting Distribution is intriguing it suggests That crypto projects and protocols which Vest most of their coins and tokens to Teams and investors have higher market Caps than those which vest to treasuries And communities The authors believe this is because Allocating more coins and tokens to the Team and investors increases liquidity Allocating more tokens to investors also Tends to attract more investors now my Only comment is that not all investors Are created equally there's a difference Between retail investors and VCS now What's cool is that the authors went as Far as creating a pie chart which shows The average vesting allocation for the 44 crypto projects and protocols with Market cap considered the average
Vesting breakdown is 31 to the team 25 To the treasury 10 to investors and 34 To the community now the author's Cautioned that although this is the Average vesting allocation it may not be The ideal vesting allocation for most Crypto projects and protocols in Addition to the underweight investor Allocation the vesting allocation that Works best likely varies from Project to Project as suggested by this image Now the sixth section is similarly Interesting because it touches on the Changes to tokenomics for a few major Cryptocurrencies the authors cover Bitcoin's Taproot upgrade the ethereum Merge and possible changes to cosmos's Inflation schedule which has been a Point of contention for atom holders As expected most of the tokenomic Changes to Major crypto projects made Them more deflationary this makes sense Because if the supply of a coin or token Stays the same or decreases while demand Stays the same or increases then prices Tend to go up ethereum's fee burning Being the best example on that note you Can find out what's been going on with Ethereum lately using the link in the Description Now the seventh section is a juicy one That's because it's about the impact of Vesting on the prices of coins and Tokens in 2022. as you might have
Guessed the price of a coin or token Crashes more than 15 on average just Before a vesting Cliff funnily enough Prices tend to go sideways after the Actual unlock however what's annoying is That the authors didn't specify which Cryptos they used in this part of the Report And what's even more annoying is that The authors specify that they measured The drop in price against BTC because It's a quote fair point of view this Presumably means that this 15 figure is Not in USD Again using BTC as the Baseline measure Of value the authors found that coins And tokens have a 27 chance of Falling By five percent prior to a vesting Cliff A 20 chance of falling 10 prior to a Vesting cliff and a six percent chance Of falling 30 prior to a vesting Cliff Hopefully they do this calculation Against USD next time anyhow the eighth Section goes over a few of the largest Coin and token unlocks in 2022. the Authors highlight a Sandbox looks rare Axi infinity and immutable X as outliers The authors explain that they chose These cryptos specifically because of All the social media bars around the Massive unlocks they start with the Sandbox's sand token which surprise Surprise has an aggressive Cliff vesting Schedule the authors found that Sans
Price often collapsed after the vesting Cliff date While they acknowledge that sand is Highly correlated to eth they point out That sand experienced additional cell Pressure it's a similar story for luxray Whose looks token has a cliff vesting Schedule on top of an aggressive linear Vesting schedule similarly to sand the Authors acknowledged that lux's price Action was initially correlated to BTC But was likewise suppressed by Additional cell pressure in the end as For axi Infinity its AXS token also has An aggressive Cliff vesting schedule the Authors again acknowledge that AXS was In a downtrend at the time of its Biggest vesting Cliffs due to broader Crypto Market factors however they found AXS underperformed eth after the vesting Cliff suggesting selling and finally we Have immutable X whose IMX token has an Aggressive linear vesting schedule with A massive vesting Cliff at the end of 2022 lo and behold IMX crashed in both USD and eth terms an immutable Alex's Co-founder subsequently announced a Tokonomic intervention to prevent more Cell pressure yikes you can learn more About immutable X using the link in the Description Now the eighth and final section of the Report discusses the outlook for the Crypto Market in the context of coin and
Token vesting schedules the authors Specify that they analyzed the vesting Schedules for the top 300 Cryptocurrencies by market cap for this Section which is awesome the authors Estimate that there is around 102 Billion dollars of the top 300 coins and Tokens waiting to vest hence the Statistic at the start of this video This might sound like a lot but the Authors found that 82 percent of the Value of the top 300 cryptos has already Vested meaning there's only 18 left to Unlock now this is significant because It suggests that coins and tokens which Have already vested most of their supply Are more likely to have a higher market Cap this is logical considering more Coins and tokens means more market cap But the lack of selling from new Supply Could mean more positive price action The catch is the that the 18 statistic Only applies to market cap the authors Note that 96 of the top 300 cryptos have Less than 25 percent left to vest 50 Have 25 to 50 percent left to vest 45 Have 50 to 75 percent left of s and 15 Have 75 to 100 left to vest Unfortunately the authors don't say Which crypto has the most left to vest Fortunately though the authors do say Which cryptos have the most left to vest In dollar terms the first is xrp at Almost 18 billion the second is filecoin
At almost 5 billion the third is Ethereum's optimism at roughly 3.7 Billion the fourth is chain link at Almost 3 billion and the fifth is by Bits bit Dao at 2.5 billion the report Concludes with the authors predicting That many crypto projects and protocols Will be forced to sell their coins and Tokens in 2023 to secure the funding They need to stay afloat surprisingly Though the authors do not showcase which Coins and tokens will see the most Aggressive vesting in the next year at Least we know which crypto projects and Protocols have the most developers more About that report in the description I Digress For what it's worth the authors promise That they won't be going anywhere and Will continue to push crypto projects And protocols to be more transparent About their tokenomics they reiterate That their mission is to help build a Better crypto industry I reckon we have That in common chaps So this brings me to the big question And that's what token unlocks his Vesting report means for the crypto Market I suppose the more accurate Question should be what this means for All the coins and tokens that still have Lots of Supply left to vest The token unlocks report suggests that There are four key takeaways here the
First is to watch out for any cryptos With vesting Cliffs and to take note of When these vesting Cliffs will occur Vesting details for most major Cryptocurrencies can be found on massari If you can't find them there you'll have To check the white paper or check out Our videos about the projects or Protocols in question ideally of course The coin or token you're interested in Will have a linear vesting Cliff this is By no means a deal breaker but it is Something to keep in mind the last thing You want is to buy the dip thinking You're near the bottom only to get Dumped on by early investors and the Team at some later date Now the second takeaway is to watch out For any cryptos which use regular Wallets for vesting this information is Harder to find but It ultimately depends On the blockchain Explorer being used Vesting addresses for erc20 tokens on Ethereum are easy to spot on etherscan Under the top holders tab if you see a Large wallet with no paper icon chances Are it's a regular vesting wallet if you See a little paper icon next to a top Address chances are it's a vesting smart Contract ideally the coin or token You're interested in will use a Smart Contract instead of a regular wallet for Vesting the third takeaway is to watch Out for any cryptos which didn't
Allocate much of their supply to the Team or to investors recall that a Healthy allocation to investors brings In more investors meanwhile more supply For the team means that the team is Incentivized to increase the value of The coin or token the caveat is that the Ideal token allocation varies from Project to project as per the findings Of the authors as such you'll have to Assess which distribution makes the most Sense so long as the supply isn't Heavily directed towards any particular Group The Coin or token you're Interested in is likely fine The fourth takeaway is the most Important and that is to watch out for Any coins or tokens which can't improve Their tokenomics there don't seem to be Many of these because most cryptos are Upgradable but the main thing to watch Out for is whether this upgrade ability Can increase value D5 protocols come to Mind here holders of popular D5 protocol Tokens could and probably will Eventually vote to direct a portion of All protocol fees to the buyback and Burn of their native token ideally the Coin or token you're interested in will Have the potential for this kind of Value capture but again this is just a Sliver of the tokenomics part of Analyzing a crypto project there are Other elements you should analyze too
And if you need help with that then you Can check out our video about how to Research cryptocurrencies the link to That bad boy will be down in the Description enjoy folks and thank you so Much for watching Foreign [Music]
