The unlocking of millions of dollars worth of DeFi tokens in 2023 could spark a significant selloff as investors dump risky assets during an extended bear market.
Several crypto projects, including move-to-earn project Sweatcoin and metaverse-focused Yuga Labs, will release additional tokens into circulation based on a vesting schedule in 2023, despite much of the crypto market still feeling the effects of the collapses of significant crypto firms, including Three Arrows Capital, Celsius, and FTX.
Vesting Schedules in Crypto Projects
Projects lock their native token into special “vesting” smart contracts to ensure the controlled release of their token at predetermined dates. A vesting schedule also reassures investors that the project’s creators are committed to fulfilling the project’s ultimate goal.
While a token release increases a token’s market cap, investors often sell their new tokens during difficult macroeconomic conditions, resulting in price dumps.
Price data surrounding previous token releases often provides a window into the effects of future releases. Here, we look at the potential for major sell-offs of three cryptos slated for major token releases in 2023.
Sweatcoin Could Dump 30% if Bear Market Continues
The first crypto token that could see a market dump in 2023 is Sweatcoin.
Launched in Sep. 2022 on the NEAR blockchain, Sweatcoin rewards its app users with SWEAT utility tokens for exercising.
Sweatcoin’s smart contracts will release 326,223,776.52 SWEAT ($3,500) on Jan. 13, 2023, for a SWEAT airdrop and contributions to the SWEAT treasury, with further unlocking of 227,105,696 SWEAT ($2,430.03) scheduled for Aug. 2023. These unlocked tokens represent roughly 2% of the SWEAT’s daily trading volume, according to market data aggregator Coingecko.
SWEAT’s initial airdrop of roughly 2 billion utility tokens saw the price spike to approximately $0.915 on Sep. 15, 2022. The subsequent unlocking of roughly 583 million SWEAT about a week later caused the price to tank 40%, while two later unlockings of similar proportion caused the price to fall 20% and 30%, according to data from Coingecko.
These numbers suggest Sweatcoin could drop as much as 30% to below $0.01 after 2023 token releases.
BitDAO Could Fall Below $0.25 after the Release of 188 Million BIT
The second crypto token to watch out for is Ethereum-based BIT, a tradeable governance token of BitDAO. BitDAO is a decentralized autonomous organization that supports DeFi projects through research and development, token swaps, and grants.
According to TokenUnlocks, BitDAO will release about 188 million BIT ($53 million) on Jan. 15, 2023, representing about ten times the token’s trading volume.
BitDAO smart contracts released 2 billion BIT tokens in July 2021, causing BIT’s price to spike to $1.72 before falling roughly 22% on Sep. 8, 2022. The price dropped 11% after releasing approximately 267 million BIT on Sep. 15, 2022, with an extended downtrend that saw the token changing hands at roughly $0.28 at press time.
An injection of 188 million BIT on Jan. 15, 2023, could see the price falling below $0.25.
APE Likely to Fall if Crypto Winter Continues
ApeCoin (APE), launched by Yuga Labs in March 2022, is the third crypto that could dump in 2023. Yuga Labs is behind the blue-chip NFT collection, the Bored Ape Yacht Club.
APE holders have governance rights in the ApeCoin DAO to help drive Yuga Labs’ Web3 and metaverse development. Yuga Labs first rolled out 150,000, 000 APE to holders of the Bored and Mutant Ape Yacht Club NFTs, and plans to unlock 7.3 million ($26 million) APE for the ApeCoin DAO treasury on Jan. 17, 2023. Smart contracts will also release about 33 million APE ($105 million) on March 17, 2023.
After ApeCoin’s release in March, its price fell to $9.62 following a brief rally that saw it touch $13.00. After that, it reached a peak of $26.70 on April 29, 2022, before falling sharply to $5.63 on May 12, 2022. Its downward trajectory for the rest of the year to date closely mirrors a decline in interest around speculative NFTs like BAYC and metaverse-related initiatives amid an ongoing crypto winter.
Unless interest in the NFT market and metaverse revives in 2023, the coming $100 million-plus token unlocks could mean more pain for APE holders.
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