what does it mean for the crypto market?

Crypto news: TIA, the token of the blockchain Celestia, has recorded its largest monthly gain, despite the imminent unlocking of 1.13 billion dollars in tokens. This surprising result is destabilizing traders’ expectations in the market.

Let’s see all the details below. 

News for TIA of Celestia that grows by 40%: what does it mean for the crypto market?

The cryptocurrency market continues to amaze, and TIA, the token of the Celestia blockchain, is a clear example of this. In the last month, TIA has recorded a growth of 40%, significantly surpassing the 13% gain of the CoinDesk 20 index.

We remind you that the CoinDesk 20 index represents a measure of the largest and most liquid criptovalute.

This significant increase has puzzled many traders who had positioned themselves for a price drop in anticipation of a token unlock worth 1.13 billion dollars scheduled for next month.

The 40% increase in the value of TIA is the largest gain recorded by the cryptocurrency since December 2023. 

While the entire cryptocurrency market has shown signs of recovery, TIA has literally outperformed, despite expectations of an imminent collapse. 

The imminent unlocking of tokens worries many investors, as on October 31, 175.74 million TIA tokens, equal to 16% of the total supply of this cryptocurrency, will be released onto the market.

The unlocking of such a massive quantity of tokens represents a threat to the price of the cryptocurrency, as the flood of new tokens on the market could cause their value to plummet. 

CryptoRank has estimated that the value of these tokens is equal to 1.13 billion dollars, a figure that represents 82% of the current market capitalization of TIA. 

Unlocks of this magnitude tend to create a bear pressure on prices, leading many market participants to hedge through perpetual contracts and OTC (over-the-counter) forward agreements.

The short trend and the short squeeze

As mentioned, in anticipation of the October 31st unlock, many traders have positioned themselves as bear, expecting the price of TIA to drop once the tokens were released. 

Jake Ostovskis, an over-the-counter trader at Wintermute, explained to CoinDesk that the demand for bear hedges has increased significantly in recent weeks. 

This attitude has led many to believe that a “short squeeze” would occur.

One short squeeze occurs when the price of an asset unexpectedly increases, forcing the bear traders to close their positions, which in turn pushes the price even higher. 

In this case, TIA has maintained its resilience despite the forecasts of a decline. Thus leading to a chain effect that has further fueled its growth.

This phenomenon has also been supported by the recovery of financing rates linked to perpetual contracts on TIA. 

After being negative since July, these rates have returned to zero. Consequently indicating an improvement in market prospects for TIA and suggesting that many bear traders have been “wrong-footed” by the price’s resilience.

The $100 million fundraising 

Another factor that has probably contributed to the TIA rally is the recent fundraising of 100 million dollars, announced this week.

This new round of financing has brought the liquidity reserve of the Celestia foundation to 155 million dollars, sparking further confidence among investors. 

Even though the team has not revealed the details on the use of these funds, some observers have speculated that it was an OTC deal with a valuation of 3.4 billion dollars, selling tokens at 3 dollars each. 

A third of these tokens will be unlocked on October 31, the same day as the upcoming release of 175.74 million TIA.

Despite the large quantity of tokens arriving on the market, many analysts believe that the unlocking has already been priced in. 

Ostovskis has observed that the market might have anticipated the event, allowing investors to take adequate measures before the unlocking actually occurs. 

This has given traders a window of opportunity to adjust their strategies. Thus reducing the negative impact that an influx of new tokens could have on the price.

According to Ostovskis, some market participants perceived OTC sales as controversial. However, in the end, the net effect seems to have been positive, allowing the market to absorb the risk more effectively. 

This has led many to believe that the worst is now behind us and that the market has already adapted to the new supply of tokens.