The Mystery of Unlocked Tokens: Why Aren’t They Circulating?

In an X post, Token Unlocks, a leading tokenomics insights platform, looked at how 90% unlocked tokens affect circulating supply.Their analysis found that higher token unlock percentages do not always mean tokens are immediately circulating.

Tokens like 1INCH were nearly perfectly aligned, with only a 1.18% difference between unblocked tokens and circulating supply; this is common in the market.

How much of unlocked tokens get translated into Cir. Supply? 🔎

While cir. supply is an industry standard, how does it compare to unlocked supply shown that is derived from projects whitepaper?

Let’s take a look at tokens with over 90% unlocks compared to their cir. supply 👇🏻 pic.twitter.com/GXOHcGLRut

— Token Unlocks (@Tokenomist_ai) October 9, 2024

However, with tokens like AAVE, they found that its circulating supply is 1.79% higher than its unlocked progress; this shows that other factors might be affecting token distribution. This is also common because circulating supply can be affected by staking or burning mechanisms.

On the other hand, AEVO and ALGO showed larger gaps in circulating supply and token unlocked differences, with AEVO at 12.57% and ALGO at 17.24%. These differences might point to unique liquidity dynamics or token distribution strategies.

Read also : Ethereum’s Circulating Supply Increases, Price Remains Volatile

The FXS token, with about 90% tokens unlocked, displayed a -50% discrepancy, further suggesting that a sizable percentage of unlocked tokens are locked away from circulation. Other tokens taken into account include ASTR, ILV, INJ, AXL, BAT and BNB.

Circulating Supply Is an Important Metric for Crypto Investors

Circulating supply is the total number of tokens available for trade and transactions by the crypto market and the general public. Circulating supply is especially useful for calculating an asset’s market capitalization.

A higher token supply often means lower token value. So, investors often look at the ratio between total supply and circulating supply before investing in a cryptocurrency.

Factors such as controlled token releases, strategic token distribution and vesting schedules can cause temporary gaps between unlocked and circulating tokens. Both an oversupply and undersupply of tokens can affect liquidity and price movement.

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