You may have heard about token unblocks if you’ve been following the cryptomarket for some time. This process involves the gradual release of specific amounts that were frozen in order to prevent early investors and project team members from making large sales.

Unlocks are widely regarded as bearish and free up liquidity, although some observers claim they only enhance an existing trend.

The Tie, a research firm, has found that coins have declined on average in the weeks leading up to the event. When the freed-up liquidity represented more than 100 percent of the daily average volume, the prices recovered quickly, but then fell again within two weeks after the unlock. The firm studied over 350,000 unlock events that involved more than 100 tokens.

Prices tend to rise faster in cases where unlocks represent more than 100 percent of the daily average volume. This is true for only a short time. The reason for this could be that traders were relieved the unlock didn’t flood the market immediately with new tokens,” Lawrence Lewitinn wrote in the newsletter of The Tie on Wednesday.

He wrote: “Yet, within two week, the prices of tokens that were subject to such significant unlocks dropped below their initial levels when the unlock was made.” This could indicate that holders waited a few more days before selling their tokens on the market.

Research by The Tie also revealed a massive increase in the trading volume of coins that were large unlocked.

Chart shows that tokens with large unlocks in relation to their average trading volume experienced greater losses two weeks after the event. (The Tie) (The Tie)

Sheldon Reback is the editor.