As decentralized exchanges (DEXes) continue to rise in popularity and trading volume, the need for thorough on-chain analysis is more crucial than ever before. Without the regulatory oversight and centralized controls of traditional exchanges, traders on decentralized platforms must do their due diligence to uncover key information that could impact token value and liquidity.
Fortunately, platforms like DEXTools are providing valuable tools to facilitate this diligence. One of their most useful features is the “Token and Liquidity Pools Unlocks” section in the DEXTboard, DEXTools’ main page, which surfaces important upcoming liquidity and token unlock metrics.
Staying on top of these events using tools like DEXTools can help traders make more informed decisions and avoid potential pitfalls.
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Liquidity Unlocks
The “Liquidity Unlocks” section reveals when portions of a token’s locked liquidity pool are set to expire. Liquidity locks are commonly used by project developers as an incentive mechanism during the initial launch period. Without locked liquidity, there is more uncertainty and risk of manipulation, as liquidity can be withdrawn at any time, increasing the volatility of the token and the risk of potential rug pulls. If the liquidity is re-locked after expiry, it shows the team’s commitment and reliability. However, monitoring is advised if it becomes permanently unlocked.
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Token Unlocks
Meanwhile, the “Token Unlocks” section exposes forthcoming releases of tokens held by VCs, early investors, advisors, or the team. It reveals how much of the not circulating supply will be put in circulation in the upcoming days, weeks, or months.
As these token holders will be free to sell once unlocked, major upcoming unlocks present risks. If a large percentage of a token’s total supply is due to be released, it could flood the market and lead to dumps that knock down the price.
By checking unlock amounts, dates, and the relative percentage of total supply on DEXTboard, traders can gauge the potential selling pressure. The dashboard also surfaces the current token price, estimated USD value of the upcoming unlock, and event timing.
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Conclusion
Having all this data in one place allows traders to monitor potential supply and price impacts across multiple assets. As DEX trading grows more sophisticated, on-chain analysis using platforms like DEXTools is becoming increasingly necessary for navigating risks and maximizing opportunities. Thorough due diligence will separate long-term successes from those who fail to do their research.
