The price of the NFT Axie Infinity (AXS) game token increased by 22% on Monday (23), and is currently trading at $12.35. Earlier, during the night, it had climbed to more than 40%. In doing so, AXS has already accumulated an 80% increase since the start of the rally two weeks ago, according to data from CoinGecko.
The rally is surprising as it comes amid a token opening, with roughly 2% of the total asset supply being distributed. Token unlocks often create downward pressure as they dilute circulating supply and often lead to sell-offs. AXS currently has a market capitalization of $1.47 billion.
While Axie Infinity players use the Smooth Love Potion (SLP) token to facilitate game functionality, AXS allows players to vote on the development of the game and how to deploy the project’s treasure.
AXS Unlock dump
Looking at TokenUnlocks data, today’s unlock is significantly lower than the previous event in November or the next unlock scheduled for May.
Consistent with Axie Infinity’s token allocation as outlined in its whitepaper, the majority of tokens unlocked during the acquisition timeline will be distributed in the form of stake rewards (29%), with the second largest stake earmarked for development (21%).
According to the acquisition schedule, today’s unlock will only be distributed to those who have earned staking rewards, which is why there will be fewer unlocked tokens today than there were previous moves.
Poor performance
In the weeks leading up to AXS’ previous open on Oct. 25, 2022, AXS underperformed significantly in the rest of the market, according to Priyansh Patel, an analyst at Delphi Research.
Patel said that traders who received the tokens as soon as they were unlocked may have started opening short positions through futures contracts, which they began to dump after receiving the unlocked tokens.
Futures contacts allow traders to open positions on the price of an asset without having to own it outright. Compared to the spot market, where there are fewer ways to sell, derivatives such as futures contracts can easily facilitate hedging.
To undo the short part of the hedge, traders started buying futures contracts, which pushed the AXS price higher and thus forced the speculative traders who were playing in a downtrend to close out positions.
It’s not clear if this exact framework is also the case for unlock codes today.
However, the aggregate interest – which shows the total number of derivative contracts between the selling entity and the buying entity that are open at any one time – indicates that traders have opened more derivatives trades in recent days.
Translated by Gustavo Martins with permission from Decrypt.
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