TIA Token Surges Ahead Of Major Token Unlock

According to CoinDesk, TIA, the token of the data-availability blockchain network Celestia, has posted its best monthly gain this year, significantly outperforming the broader market. This surge comes despite traders positioning for a price drop due to a $1.13 billion token unlock scheduled for October 31. The token has surged by 40%, the largest increase since December 2023, compared to a 13% gain in the CoinDesk 20 Index, which measures the largest and most liquid cryptocurrencies. The upcoming token unlock will release 175.74 million TIA, representing 16% of the cryptocurrency's total supply and worth $1.13 billion, or 82% of its market capitalization, according to CryptoRank. Such large unlocks typically create bearish pressures in the market. Jake Ostovskis, an over-the-counter trader at Wintermute, noted an increase in TIA hedging demand ahead of the unlock, both via exchange-traded perpetuals and OTC forward agreements with market makers and trading desks. The bias for short positions, likely due to hedging activity, may have led to a 'short squeeze,' contributing to the TIA rally. A short squeeze occurs when the asset price remains resilient, forcing bears to close their positions, which in turn puts upward pressure on prices. Ostovskis mentioned that traders had been selling ahead of the unlock event since July, suggesting that the squeeze had already occurred. This is evident from the recovery in funding rates tied to TIA perpetuals, which have rebounded to nearly zero, indicating a neutral stance after being negative since July. Additionally, a $100 million fundraise announced this week likely provided further upward momentum, encouraging bears to exit their short positions. The fresh round raised the foundation's cash stash to $155 million, although the team did not specify how the funds would be used. Some observers suggested the fundraising was an OTC deal at a $3.4 billion valuation, with the token sale priced at $3 and one-third of the tokens to be unlocked on October 31. Ostovskis noted that the impending unlock might have been priced in, with some commentators viewing the OTC sales as controversial. However, he argued that the removal of a large cliff and the pre-hedging unlocks have been positive overall, allowing the market to price in the event in advance.