August Anticipates $200M in Token Unlocks for W and ZETA: How Will Prices React?
Biggest Token Unlocks in August | Credit: Hameem Sarwar
Key Takeaways
- ZetaChain and Wormhole face the biggest token unlocks in August.
- Their prices have both fallen to new all-time lows in July.
- Will the increase in supply exacerbate their bearish trends?
Between August 1 and 3, ZETA and W will see a significant percentage of their circulating supply unlock.
Token unlocks increase an asset’s circulating supply, which can negatively affect its price, especially if the unlock is significant relative to the circulating supply.
Will these token unlocks lead to a price decline, or will the market absorb the extra supply without any problems?
Wormhole Circulating Supply Balloons During Unlock
Wormhole is set to inject 600 million W tokens on August 3, marking a significant 33% of the total circulating supply. This unlock, the first major cliff release, will be the only one until April 2025.
We have previously analyzed that token unlocks of less than 3% of the total supply have no observable effect on the price. On the other hand, large token unlocks often adversely affect the price. An example of this is XAI, which fell 20% shortly after its token unlock event in July, amounting to 77% of the circulating supply.
Wormhole launched on April 4, 2024, with a listing price of $1.55. During its funding round, its price was $0.25 . So, even those who purchased in the early funding rounds only received a marginal increase in their investment.
While this could mean that investors will not be running to cash out their profits, they could be disillusioned by the lackluster performance and look to get out at break even.
In any case, the entirety of the unlock will go to the “Community & Launch” category. So, despite the supply dilution, this is less likely to cause sell pressure than it would have been if it went to early investors.
Wormhole’s price outlook appears bearish, exacerbating the selling pressure. After hitting an all-time low on July 5, the price began to ascend along a support trend line.
However, this uptrend was short-lived, as the price broke down from the trend line on July 24. This breakdown also confirmed the $0.33 horizontal area as a resistance level.
Furthermore, technical indicators are aligned with the bearish sentiment. The Relative Strength Index (RSI) is currently below 50, indicating a lack of momentum, while the Moving Average Convergence Divergence (MACD) is negative, suggesting a downward trend.
How will the ZETA Price React?
Zetachain is also bracing for a significant token unlock on August 1, when $34 million worth of ZETA tokens, representing 19% of the circulating supply, will be released.
This cliff unlock will be distributed among various stakeholders, with Core Contributors and Advisors receiving the largest share, followed by smaller allocations to the protocol treasury, user growth pool, and ecosystem growth fund.
Zeta’s upcoming unlock is part of a larger token release schedule that will continue monthly until January 2028. While the absolute number of tokens unlocked will remain constant, the proportion of the circulating supply will decrease over time.
Currently, only 13% of the maximum supply of ZetaChain is unlocked, leaving a significant portion of tokens yet to be released.
In terms of market performance, ZETA’s price performance has been trending downward since February, hitting a new all-time low of $0.57 on July 5. Although the price recovered a little bit, it has since returned to the same level, closing at $0.57 on July 29.
This price action suggests that the upcoming token unlock may put additional downward pressure on the ZETA price.
ZETA’s price action suggests a potential reversal. The price is likely to be forming a double bottom, a bullish pattern that could indicate a trend reversal. Supporting this possibility is the daily RSI and MACD which have generated a bullish divergence, marked in green.
Furthermore, if the decline is part of an A-B-C corrective structure, the 1:1 ratio between waves A and C could indicate that the bottom of the decline has been reached. This adds credence to the potential reversal scenario.
However, it’s important to note that ZETA’s price has yet to break out from its descending resistance trend line. The presence of numerous lower highs and lows also suggests that the trend remains bearish. Therefore, a breakout above the trend line is necessary to confirm a trend reversal.
In the event of a continued decline, the next target for ZETA’s price would be $0.46, derived from the 1.61 external Fibonacci retracement of the previous increase.
Conversely, if a breakout occurs, the first target to the upside would be $0.82. A close above the trend line would be a crucial step in confirming a potential trend reversal and paving the way for further gains.
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