TIA Releases $1.13 Billion Worth of Tokens: Should You Long or Short?

The upcoming $1.13 billion token unlock for TIA, the token of the Celestia blockchain network, has stirred up intense speculation in the crypto market.

Scheduled for October 31, this release will add 175.74 million TIA tokens, representing 16% of its total supply, into circulation.

For many traders, the key question is: Should you take a long or short position on TIA?

TIA’s Unexpected Rally

TIA has seen a dramatic 40% surge in value in recent weeks, far outperforming the broader market. For context, the CoinDesk 20 Index, which tracks the largest cryptocurrencies, only gained 13% during the same period. This rally is particularly surprising considering many traders expected a price drop due to the impending token unlock, which will increase the supply by over $1 billion worth of tokens.

Historically, large token unlocks tend to create bearish pressure as the market absorbs the additional supply. Yet, this hasn’t been the case for TIA, as its price surge contradicts the expected trend.

Hedging and Short Squeezes

According to Wintermute, a major player in the crypto market-making space, there has been a noticeable increase in TIA hedging activity. Traders are using both perpetual futures and over-the-counter (OTC) forward agreements to mitigate potential downside risks from the massive token release.

Interestingly, the market’s bearish sentiment seems to have triggered a short squeeze. In a short squeeze, traders betting against the asset (i.e., those expecting the price to fall) are forced to close their positions as the price rises, pushing the price even higher. This phenomenon likely contributed to the recent 40% rally in TIA’s price.

Funding rates tied to TIA perpetual contracts, which were negative since July—indicating a heavy bearish bias—have since returned to neutral. This shift suggests that short positions are being closed as TIA’s price remains resilient, reinforcing upward momentum.

A Closer Look at the $100 Million Fundraise

Adding to TIA’s bullish momentum is the recent announcement of a $100 million fundraise, which increased the Celestia Foundation’s cash reserves to $155 million. Although details regarding the use of the funds remain unclear, the news further fueled buying interest and may have caused some traders to abandon their short positions.

Speculation is rife that the fundraise involved an OTC deal, valuing the project at $3.4 billion. Some observers believe the tokens from this sale, priced at $3 each, will be unlocked alongside the October 31 release.

Is the Token Unlock Already Priced In?

According to Jake Ostovskis of Wintermute, the market may have already priced in the token unlock.

Many traders began hedging against the unlock as early as July, leading to an early wave of short selling. Now, with shorts being squeezed out, some of the expected negative impact from the unlock could have already played out.