Earlier this year Dymension released their token $DYM, airdropping it to testnet participants. The benefits of $DYM were quickly seen by stakers when multiple projects airdropped their tokens to them, just for staking. I didn't stake any $DYM at the time and I didn't get any airdrops then. The FOMO on potential future airdrops got to me and I staked $50 worth of $DYM in March/April, who no like better thing?

My on-chain brethren, I withdrew all my staked $DYM in June for $22. I lost more than half the initial value I staked, even though the quantity of $DYM I had increased from staking rewards. So what happened? Why did my staked amount lose half its value so fast?

The answer that seems obvious is the slump cryptocurrencies are experiencing, but a more unknown factor is the real reason.

Token Unlock

Token unlock refers to the scheduled release of previously locked tokens into the market.

The image above shows $DYM's unlock schedule. While the bulk of $DYM is still to be unlocked, notice how the beginning part still rises. This is because $DYM tokens were entering the market every day through Linear Unlocks.

Linear Unlocks defines the unlocking of a token in a linear progression. The token unlock happens in a straight line. For example, $DYM has been linearly unlocking ~ 855k $DYM. This means that ~ 855k $DYM has entered the market every day. This is different from a Cliff Unlock.

A Cliff Unlock can be considered a bulk unlock, where many tokens are unlocked on a specific day, not every day like in linear unlocking.

Token unlocks are usually bearish events for the price but can be bullish on some occasions. So, why are they largely bearish?

1. Supply and demand: When a large number of tokens are unlocked, it increases supply. If demand doesn’t match this increase, the price drops. The excess supply creates a large selling pressure that cannot be matched, hence the price drop.

2. ROI of early investors and team members: They often receive tokens at a meagre cost. When their tokens unlock, they might sell to secure their profits. This selling pressure can push prices down.

3. Market perception: Token unlocks can signal potential sell-offs, causing traders to preemptively sell. This creates a self-fulfilling prophecy whereby the expectation of a price drop leads to an actual price drop.

At its current price, my initial $DYM stake would be worth $10, one-fifth of the initial value. Cryptos are taking a beating now and it's not a pretty one, but $DYM has been handed a double whammy because of its token unlock schedule.

Token unlocks become even more bearish if the circulating supply of the token is less than 60%. The lower the percentage of the supply circulating, the more bearish the unlock, especially with Cliff Unlocks.

If you want to check the unlock schedule of your tokens, go to Token Unlock and search for the token you wish to track.