- Polkadot faces price pressure as 99 million DOT tokens worth $427 million unlock on October 24, potentially impacting the market.
- Traders are concerned that this massive token release could lead to a bearish trend, reversing recent gains in DOT’s price.
Polkadot (DOT) investors are on high alert as they anticipate a significant unlocking event scheduled to unfold on October 24, 2023. Token analytics firm Token Unlocks announced that approximately 99 million DOT tokens, valued at nearly $427 million, will become accessible on the market.
This massive release of tokens, linked to the maturation of initial parachain crowd loans, has raised concerns about its potential impact on DOT’s market value.
🌟 Is anyone curious about the pre/post-unlock analysis of @arbitrum ? 🌟
There was only one cliff unlock of $ARB
Here are the price impact results after the unlocks💡;– On the first day after unlocks, the price rose by 3%✨
– Then, it gradually dropped to -21% (around 21… pic.twitter.com/GQtxGCgoQF— Token Unlocks (@Token_Unlocks) September 18, 2023
Unlocking DOT Tokens: What it Means
Token unlocks indicate the release of crypto assets that were previously locked or restricted from circulation. Traders and analysts typically perceive such events as bearish catalysts because they introduce more assets into the market. In the case of Polkadot, the initial parachain crowd loan process was associated with this event.
Polkadot’s unique approach restricts its support to approximately 100 parachains, allocating these slots through auctions where winners secure their positions by locking up DOT tokens for up to 96 weeks. However, this process can be financially demanding, often requiring millions of dollars.
To address this challenge, the concept of crowdloans was introduced. Under this model, projects with limited starting capital can crowdsource DOT tokens from their communities and backers. Once the bonding period concludes, participants regain access to their tokens.
The unlocking event on October 24 is just the beginning, with more similar events anticipated in the near future. Around 1.32 billion DOT tokens were in circulation at the time of writing, and the recent unlock is poised to release a staggering 75% of this total into the market.
Impact on Market Dynamics
While trader behavior can be unpredictable, there is a significant likelihood that retail investors will capitalize on the opportunity to unlock their DOT assets, potentially leading to a bearish trend in DOT’s price. This could reverse the gains made in the recent market rally.
DOT was valued at $4.22 at the time of writing, reflecting a 1.76% increase in the last 24 hours. Polkadot (DOT) had recently experienced a sluggish price trend in recent months, but it observed a slight uptick at the start of the week. Despite signs of a weak recovery, focusing on the increased development activity and higher spending in Q3 2023 is essential.
Notably, this recent uptick brought DOT’s price to $4.00, with a trading volume of around $203 million. On the derivatives front, both long and short trading positions approach a state of balance. Coinglass data revealed approximately $385,000 in long positions and $430,000 in short positions as of Monday.
Development Activity and Growth Prospects
Polkadot’s development activity has gained momentum, earning it a second-place ranking among the top blockchains in the last week, according to Polkadot Insider. The ongoing development work signals promising long-term growth for the network.
However, Token Terminal reports a decline in code commits over the past 30 days, with 1070 commits, down 29%. Similarly, the number of core developers is 141.5, showing a 6% decrease based on a 30-day average.
