TIA, the token associated with the data-availability blockchain network Celestia, has achieved its best monthly performance of the year, significantly outperforming the broader cryptocurrency market. This impressive surge of 40% marks the largest increase since December 2023, especially remarkable when contrasted with the 13% rise seen in the CoinDesk 20 Index, which tracks the most prominent and liquid cryptocurrencies. This price action occurs amid widespread trader speculation regarding a price correction, as a substantial token unlock is anticipated on October 31, amounting to $1.13 billion worth of TIA tokens.
The upcoming unlock will release 175.74 million TIA, which represents 16% of the total supply of the cryptocurrency, and constitutes a staggering 82% of its market capitalization, as reported by CryptoRank. Historically, significant token unlocks have generated bearish pressures in cryptocurrency markets, leading to concerns among traders. Jake Ostovskis, an over-the-counter trader at Wintermute, observed an increase in demand for hedging TIA ahead of the unlock event.
This has been seen both through exchange-traded perpetual contracts and over-the-counter (OTC) forward agreements with market makers. The prevailing bias towards short positions may have been influenced by this activity, likely culminating in a phenomenon known as a 'short squeeze.' When the price of an asset remains resilient in the face of anticipated bearish pressure, it can necessitate that short sellers close their positions to stem losses, inadvertently causing prices to rise even further. Ostovskis highlighted that traders had been liquidating positions in anticipation of the unlock since July, indicating that the short squeeze might have already played out prior to the actual unlocking of tokens.
Evidence of this can be seen in the recovery of funding rates associated with TIA perpetuals, which have rebounded to nearly neutral territory, moving back towards zero after displaying negative sentiment since mid-year. Moreover, a recent $100 million fundraising initiative has likely added fuel to this bullish momentum, encouraging short sellers to cover their positions.
This fresh influx of capital has raised the foundation’s total cash reserves to $155 million. Specific details on the allocation of these raised funds have not been disclosed, yet industry observers speculate that the fundraising was tied to an OTC arrangement at a valuation of $3.4 billion, with the initial token sale priced at $3 and a third of the tokens set to be unlocked on the event date. While some market commentators have queried whether the upcoming unlock has already been priced into TIA's current valuation, Ostovskis contends that the removal of a significant supply cliff, combined with pre-hedging activities surrounding the unlock, casts a generally positive light on the market.
Such proactive measures have enabled market participants to better anticipate and price this event in advance, reflecting a level of confidence in TIA’s underlying value..