Altcoin Rally Halts: $650M Token Unlock Jolts Crypto Market

• Crypto Tokens DYDX, OP, SUI Witness Sharp Decline Prior to Major Token Unlock
• Altcoins Face Supply Increase Amid Negative Market Conditions
• Impact of Token Unlocks on Market Supply
• Drop in Values for Various Crypto Tokens

Crypto Tokens DYDX, OP, SUI Witness Sharp Decline Prior to Major Token Unlock

Before large token unlocks took place, crypto tokens such as DYDX, OP, and SUI experienced a noticeable decline, underperforming the broader Coindesk Market Index. Unlocks can lead to an increase in a digital asset's supply and offer the opportunity for early investors to sell tokens.

Altcoins Face Supply Increase Amid Negative Market Conditions

Several prominent alternative cryptocurrencies, including the native tokens of dYdX$3.13 -1.20% (DYDX), Optimism$3.67 -1.41% (OP), and Sui (SUI) experienced a drop in values on Monday. This is largely attributed to the impact of significant token unlocks on prices during a generally negative period for the broader crypto market. It has been projected that altcoins will see nearly $650 million worth of supply increase throughout this week, as per data from Token.Unlocks and CryptoRank.

Impact of Token Unlocks on Market Supply

DYDX is expected to witness around $480 million worth of tokens added to its circulating supply, virtually doubling the existing quantity of tokens in the market. Other crypto tokens including OP, SUI, Axelar (AXL), Immutable X (IMX), 1inch (1INCH), and Hedera$0.089 -1.07% (HBAR) are also set for significant unlocks in the coming days. Token unlockings typically result in an augmentation in the asset's supply, as coins are released from a vesting period that includes early investors. Earlier this year, a study by The Tie, a crypto analytics firm, found that large unlocking events often lead to price declines due to the supply increase surpassing the investor demand for the asset.

Drop in Values for Various Crypto Tokens

Over the past 24 hours, Axelar (AXL) experienced a 10% decline, as approximately $18 million worth of tokens, constituting about 5% of its market capitalization, were added to its supply. This was part of its scheduled monthly token unlock. Similarly, DYDX dropped by 7% during the same period, in anticipation of the release of $480 million worth of tokens on December 1. With an unlock of $40 million in tokens impending on November 30, OP also saw a near 6% decline.

The supply of SUI is set to increase by $48 million over the duration of the week, causing it to plunge by 8.8% during the day. 1INCH fell over 4% with a nearly 10% increase, or $33 million, in its supply scheduled for December 1. IMX and HBAR each faced declines of 2%-3% with each expecting approximately $11 million tokens to be unlocked this week.

During the same period, bitcoin (BTC) saw a 0.7% decrease, while the broad-market crypto index CoinDesk Market Index (CMI) declined by 1.5%.

Edited by Jonathan Stoker