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On Aug 14, a scheduled token unlock event will see 332.55 million SAND tokens worth $133 million released into circulation. Historical data shows that market reactions could put The Sandbox price stability at risk.
According to data from TokenUnlocks.App, The Sandbox is set to increase its circulating supply by 332.55 million SAND tokens on August 14. In addition to the 372.57 million SAND added during the previous unlock event on Feb.14, this will bring the total inflation rate for 2023 to 705 million tokens.
On-chain data analysis examines if The Sandbox user base growth and network demand can absorb the 41.85% inflation without threatening SAND price stability.
Compared to 2022, The Sandbox Network Growth has Declined Considerably
One of the critical factors that cushion the effect of a massive token unlock is Network Growth. It evaluates the rate at which the blockchain network attracts new users.
According to Santiment, while the circulating supply is about to increase by another 16% in August 2023, the Network Growth rate has declined considerably.
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As seen below, The Sandbox achieved a 2023 peak in Network Growth when 1,899 new addresses were created on January 15. But notably, this is a staggering 76% lower than last year’s peak of 7,885 new user wallet addresses recorded on Feb 23, 2022.
Essentially, Network Growth measures the user-acquisition rate by summing up the new wallet addresses created daily. This gives a rough estimate of the number of new users joining the ecosystem.
Massive token unlocks during a period of decline in user acquisition rate could trigger intense bearish pressure.
The chart above shows that The Sandbox has not attracted substantial user base growth to soak up the inflationary pressure from the upcoming $133 million token unlock.
Hence, strategic investors could take short positions, putting SAND price stability at risk in the coming weeks.
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The Sandbox Long-Term Holders are Caving Under Pressure
On-chain data from IntoTheBlock shows that 66.6% of TheSandbox holders are doing so at a loss. Despite the current unfavorable prices, a group of whale investors have started dumping their SAND holdings to get ahead of the post-token unlock price dip.
Notably, The Sandbox whales holding cumulative balances of 1 million to 10 million SAND began to sell around July 13, exactly one month to the next token unlock event.
As shown below, the whales held a cumulative balance of 284.3 million SAND tokens as of July 13. But currently, they have only 252.2 million tokens left in their wallets. This means they have sold off about 30 million SAND in less than three weeks.
At current market prices of $0.40, the 30 million tokens recently offloaded by the whales are worth $12 million. Such a large outflow of funds signals that the whales are positioning for the token unlock to trigger a significant price slump.
The chart above also shows that the trading patterns of this group of whales have been closely correlated to SAND price movement.
Hence, if the pattern repeats, their selling pressure could continue to drag down the SAND price in the coming weeks.
SAND Price Prediction: $0.30 Looks Attainable for the Bears
If whales continue to mount sell pressure, it’s only a matter of time before retail investors join in on the bearish trend. Hence, The Sandbox price could wobble below $0.30 as the token unlock draws near.
However, the 1,250 addresses that bought 2.6 million SAND tokens at the average price of $0.37 could offer a lifeline. But if the token unlock threatens the price stability as predicted, SAND could drop toward $0.30.
Still, if The Sandbox attracts sufficient network demand ahead of the unlock event, the price could rebound toward $0.45.
Although, 1,400 holders that bought 55.2 million SAND at the average price of $0.42 could halt the recovery. Nevertheless, the SAND price could stabilize and promptly reclaim the $0.45 territory if the bulls can scale that sell wall.