Avalanche’s AVAX Underperforms Ahead of $365M Token Unlocking Event

Avalanche’s native token AVAX has experienced a period of underperformance in the crypto market over the past week, as data shows that it has lagged behind other digital assets. This underperformance comes ahead of a significant token unlocking event, where $365 million worth of locked-up tokens will be released from vesting and added to circulation on Thursday, according to Token.Unlocks data.

The AVAX token, which is the native cryptocurrency of the Avalanche network, dipped more than 3% over the past week, while the majority of cryptocurrencies saw gains in price. In fact, out of the 173 constituents of the broad-market Market Index (CMI), 148 recorded price increases. The CD20 Index, which tracks the performance of the largest and most liquid crypto assets, advanced 6% during the same period. At the time of writing, AVAX was trading at $38, which is 23% lower than its December high.

The underperformance of AVAX can be attributed to the upcoming unlocking event, where 9.5 million previously locked-up tokens, worth $365 million, will be released. This will increase the circulating supply of the asset by approximately 2.6%. The unlocked tokens will be distributed as follows: 4.5 million to team members, 2.25 million to strategic partners, 1.67 million to the ecosystem development foundation, and 1.13 million earmarked for airdrop. On-chain data shows that approximately 58% of all AVAX tokens have now been unlocked.

Token unlocks typically result in an increase in the supply of an asset, as previously locked-up coins are released from a vesting period, including to early investors. According to a report by crypto analytics firm The Tie, large unlocking events often lead to price declines within two weeks, as the increase in supply outpaces investor demand for the asset.

As AVAX prepares for its $365 million token unlocking event, investors will be closely monitoring the impact on the token’s price and market performance. The unlocking of such a significant amount of tokens could potentially put downward pressure on AVAX’s price in the short term, as the market adjusts to the increased supply. It remains to be seen how the token will fare in the aftermath of this unlocking event and whether it can regain its momentum in the crypto market.