Celestia’s TIA Posts Biggest Monthly Gain This Year Even as Impending $1.13B Token Unlock Spurs Hedging

As a seasoned analyst with over two decades of experience in the financial markets, I have seen my fair share of market anomalies and unexpected price movements. However, the recent performance of TIA, the token of data-availability blockchain network Celestia, has left me genuinely puzzled.

In simpler terms, the digital token from Celestia’s data-availability blockchain network, named TIA, recorded its highest monthly growth this year. This outperformance was quite substantial compared to the overall market trends, leaving traders surprised who had anticipated a price decrease due to an upcoming unlock of $1.13 billion worth of tokens scheduled for next month.

The impressive 40% increase, the largest since December 2023, stands out when compared to the 13% rise in the CoinDesk 20 Index, a benchmark for major, readily tradable cryptocurrencies. This growth occurs amidst investors looking for protective measures against potential price drops, as they worry that the significant token release scheduled for October 31 could oversaturate the market and lead to price decreases.

In approximately a month, an unveiling is scheduled to take place that will make available around 175.74 million TIA units. This amount represents about 16% of the entire TIA cryptocurrency supply and holds a value equivalent to $1.13 billion, or roughly 82% of its market capitalization. As large disbursements like this can frequently exert downward pressure on the market, it’s important to keep an eye on such events.

There’s been a rise in the need for TIA hedging, particularly before October 31st. This demand is being met through exchange-traded perpetuals and forward agreements with market makers or trading desks, as reported by Jake Ostovskis, an OTC trader at Wintermute, in a conversation with CoinDesk on Telegram.

Short squeeze

It’s possible that a preference for short positions, perhaps due to hedging activities, may have triggered a “short-squeeze” scenario, boosting the TIA rally. In a short squeeze, if the asset price unexpectedly stays strong, it forces investors who had bet on the asset falling (known as bears) to close their positions. This action increases demand for the asset, pushing its price up.

Traders attempted to offload their positions prior to the [unfreezing] event in late July, according to Ostovskis. In my opinion, the price increase, or “squeeze”, has already taken place.

It’s clear that the funding rates associated with TIA perpetuals have significantly improved, returning almost to neutral levels (close to zero). They had been in negative territory since July previously, as explained by Ostovskis. When rates fall below zero, it indicates traders are making bearish wagers to safeguard against potential price drops due to the massive influx of tokens.

The return to normal levels following the Transient Ischemic Attack (TIA) price surge implies that a large number of short-sellers may have been forced out, potentially causing an unintentional price increase due to a squeeze.

The $100 million fundraise

This recently announced $100 million fundraising could provide bulls with an additional compelling motive to stay long, boosting market optimism. With this latest round, the organization’s financial reserves now stand at $155 million; however, specific details about how these funds will be employed remain undisclosed.

Certain anonymous commentators propose that the fundraising event might have been a private Over-The-Counter (OTC) transaction, valued at around $3.4 billion, carried out directly with the foundation. The token offering was reportedly priced at $3 and a third of this amount is set to be released on October 31.

According to Ostovskis, the impending unlock may have been priced in.

According to some analysts, over-the-counter (OTC) sale transactions have raised concerns. However, Ostovskis pointed out that eliminating a significant barrier and enabling pre-hedging has generally been beneficial, as it allows the market to anticipate this event, thereby smoothing out its impact.