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Token Lockups
Token lockups are a key tool in cryptocurrency projects, designed to foster stability, trust, and commitment. By temporarily restricting the sale or transfer of tokens, lockups help prevent sudden market dumps, signal the team’s long-term dedication, and maintain regulatory compliance.
It’s similar to employee stock options, where vesting periods ensure employees are motivated to see the company thrive. In the same way, token lockups align the interests of early investors and project teams with long-term success.
Lockups come in different formats like vesting schedules, fixed, or dynamic lockups each with unique impact. While they limit immediate liquidity and carry risks of post-lockup price drops, they also offer the potential for price appreciation over time.
Enforced by smart contracts, these lockups provide transparency and security for investors. Understanding lockup terms and market sentiment is essential to managing risks and capitalizing on potential gains.
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