Locked Crypto Positions Bleed 50%—Early Investors Left Holding the Bag
Token vesting schedules backfire as early backers watch paper gains evaporate. Another reminder that in crypto, ’hodl’ sometimes just means ’slow-motion rug pull.’
Widespread devaluations across top tokens
Among the projects tracked, nearly all showed considerable valuation declines. SCR and BLAST recorded the largest year-over-year drawdowns at -85% and -88%, respectively.
EIGEN followed closely with a -75% drop. Other tokens, such as ZK (-64%), W (-50%), IO (-48%), and TIA (-44%), also posted substantial declines relative to their locked OTC valuations from the previous year.
Only JITO posted an increase, with a +75% gain relative to last year’s valuations, standing out as an exception in an otherwise broadly negative environment for locked token holders.
According to Sabharwal, the disparity between OTC valuations and current spot prices highlights the risks of investing in illiquid, locked positions during early-stage token rounds.
While these early investments are typically structured with the expectation of long-term upside, market volatility and project-specific factors over the past 12 months have led to substantial underperformance relative to initial valuations.
In the same period, the 22 sectors in the crypto market, in addition to Bitcoin (BTC) and Ethereum (ETH), experienced an average correction of 40.7%, based on Artemis. This is nearly 20% better than the performance of locked tokens.
Implications for token markets and early investors
The data suggests that many early-stage token investors who committed to locked positions may have missed better exit opportunities in the secondary market throughout 2024.
Locked tokens typically come with vesting schedules or transfer restrictions, which prevent immediate liquidity and expose holders to market shifts during the lock-up period.
The data shared by Sabharwal also reflects broader market conditions affecting fully diluted valuations across the crypto sector. Newer projects face intensified pressure in secondary markets compared to their initial fundraising rounds.
