Supply Overhang Risk

Supply overhang risk refers to the danger that a large volume of tokens, held by early investors or the project team, will be dumped on the market once they become liquid. This creates a ceiling for the price, as the market must absorb the selling pressure before significant upward movement can occur.

This risk is particularly prevalent in projects with aggressive emission schedules or high concentrations of tokens in the hands of a few entities. Investors must carefully evaluate the distribution of tokens and the maturity of the project to gauge the likelihood of such a supply overhang.

Managing this risk involves monitoring on-chain movements of large wallets and understanding the lock-up status of major holdings.