According to CoinDesk, TIA, the token associated with the data-availability blockchain network Celestia, has achieved its strongest monthly performance this year, significantly outpacing the overall market. This surge of 40% marks the most considerable increase since December 2023, even as traders brace for a $1.13 billion token unlock set for October 31. In contrast, the CoinDesk 20 Index, which tracks the largest and most liquid cryptocurrencies, saw a modest gain of only 13%.

The upcoming token unlock will release 175.74 million TIA tokens, constituting 16% of the total supply and amounting to 82% of the token’s market capitalization, as reported by CryptoRank. Typically, such large unlocks can exert bearish pressure on the market. Jake Ostovskis, an over-the-counter trader at Wintermute, noted a surge in demand for hedging against TIA in anticipation of the unlock, with traders utilizing both exchange-traded perpetual contracts and OTC forward agreements.

The prevalent sentiment for short positions likely contributed to a ‘short squeeze’ that fueled the recent rally. A short squeeze occurs when the price of an asset remains stable or rises, compelling traders holding short positions to buy back shares to cover their losses, which in turn drives the price even higher. Ostovskis highlighted that traders have been selling TIA in advance of the unlock since July, suggesting that the short squeeze may have already taken effect. This is reflected in the funding rates for TIA perpetual contracts, which have rebounded to nearly neutral levels after previously being negative for months.

Additionally, a recent announcement of a $100 million fundraising round likely added to the upward momentum, encouraging some bearish traders to exit their positions. This funding round brings the foundation’s cash reserves to $155 million, although the specific use of these funds has not been disclosed. There are indications that this fundraising may have involved an OTC deal, with the valuation estimated at $3.4 billion and tokens priced at $3, one-third of which are scheduled for unlocking on October 31.

Ostovskis noted that the impending unlock may have already been factored into the current market conditions. Some analysts view the OTC sales as contentious; however, he argued that the pre-hedging strategies and the removal of a significant supply cliff have had a net positive effect, allowing the market to adjust and price in the unlock in advance.