Understanding Token Unlocking: What Cryptocurrency Project Investors Must Know

Why do project parties lock tokens?

Even when a new crypto project is launched, not all Tokens flow into the market immediately. There are actually three strategic reasons for this.

1. Prevent insider selling If the founding team and early investors hold a large number of tokens, there is a possibility that they will sell everything immediately after the project launch. By establishing a lock-up period, such “rug pulls” can be prevented.

2. Show the team's commitment The fact that our tokens are locked serves as a signal that the founders are seriously betting on the long-term success of the project party. This is likely to lead to investor trust.

3. Avoid supply shocks When a large number of tokens are released to the market at once, the demand side cannot absorb them all, causing a sharp price drop. A phased release can minimize the impact on the market.

What is a Vesting Schedule?

“Vesting” is a mechanism for gradually releasing locked Tokens over a certain period. For example:

• Year 1: Release 10% of the total Token supply
• Year 2: Release an additional 20%
• Year 3: Release 30%
• Year 4: Release remaining 40%

With this method, even if there is some selling pressure during the annual unlocking events, the risk of a sudden crash can be mitigated.

Who are the subjects of the unlock?

Different groups will follow different vesting schedules:

Founding Team — Longest lock-up period (typically 2 to 4 years) Initial Investors (Seed/Private Sale Participants) — Moderate Lock-up Period (1-2 Years) Community Members — Shorter lock-up period or no lock-up period Consultant — Long-term lock in accordance with the team

Reasons Investors Should Monitor

Large unlock events have a direct impact on the market:

Increased Selling Pressure — As the unlock date approaches, holders may start thinking “I'll sell once it's unlocked,” which can lead to a decrease in price in advance.

Improvement of liquidity — As the circulation increases, trading becomes more active, which may lead to a rise in recognition for good project parties.

Long-term market balance — A gradual increase in supply tailored to the growth stage of the project party supports sustainable value appreciation.

Checkpoints Before Investment

Before investing in the project party, please check the official white paper and token allocation table. Pay special attention to the following:

• Unlocking schedule for the next 12 months
• The length of the lock-up period for founders and early investors
• Token allocation ratio for the community
• How the price reacted during past unlock events (case studies of similar project parties)

Summary: Token unlocking is not just a technical matter; it is an important indicator of a project's transparency and sustainability. Price fluctuations around significant unlocking events are not “bad news” but evidence that market participants are functioning normally. If you understand the plan in advance, you can avoid emotional panic selling.