Celestia Blockchain’s TIA Posts Highest Monthly Growth Amid $1.13B Token Unlock Expected
Date: 2024-09-27 Author: Gabriel Deangelo Categories: BLOCKCHAIN, CRYPTO PAYMENTS
The Celestia blockchain network’s TIA token posted its highest monthly gain of the year in September 2024, significantly outperforming other cryptocurrencies on the market. Despite expectations of a price drop due to a $1.13 billion token unlock scheduled for October 31, TIA’s value rose 40%. By comparison, the CoinDesk 20 Index, which tracks the largest cryptocurrencies, posted just a 13% gain over the same period.
The upcoming unlock will affect 175.74 million TIA tokens, representing 16% of the cryptocurrency’s total supply, or 82% of its current market cap. Typically, such large events would cause downward pressure on the market as the supply of assets increases. However, as Wintermute noted, the increased demand for hedging ahead of the unlock appears to have led to an unexpected price increase for the token.
Short Squeeze and Its Impact
Some market participants, looking to hedge against a potential price drop after the unlock, opened short positions, which could have led to a so-called "squeeze". This occurs when the price of an asset, contrary to expectations, remains stable or increases, forcing short sellers to cover their positions, thereby further increasing the price. According to Jake Ostavskis of Wintermute, this could have been one of the reasons for TIA's September rally.
The situation is confirmed by the recovery of TIA perpetual contract funding rates, which have returned to zero after being in negative territory for a long time since July. Negative rates indicated that bearish sentiment was dominant, but their recovery to neutral levels signals that short positions have been squeezed out, leading to further growth in the token price.
Impact of a new funding round
Another factor that contributed to the growth in the value of TIA was the announcement of a new funding round, during which $100 million was raised. These funds increased the total fund of the project to $155 million, which gave market participants additional reasons to cover short positions.
Some anonymous sources claim that the funding was related to an over-the-counter deal with the project’s funding at a valuation of the company at $3.4 billion. The tokens in this deal were priced at $3 per unit, and a third of them will be unlocked on October 31.
Thus, according to Ostavskis, the market has probably already priced in the expected unlocking of tokens, and investors’ hedging actions only contributed to this.
