The native token of the Solana memecoin launchpad Pump.fun, PUMP, surged over 10% despite the massive token unlock finalized on the 14th of July. The recent token unlock began on the 12th of July, with 54 billion PUMP tokens (5.4% of supply and worth $86 million) for team members.
Another tranche of 35 billion PUMP (worth $56 million) was also released for existing investors. That’s about 89 billion PUMP tokens worth $142 million that could easily trigger massive selling pressure.
As of writing, only 52 billion PUMP tokens (worth $76 million) had been distributed to team members. However, half of the $142 million unlocked tokens remained a massive overhang that could weigh on the market.
Will PUMP’s rally falter amid a $142M supply overhang?
On the contrary, the token price blasted 11%, bringing its weekly recovery gains to over 20%. The rally was partly driven by a broader market relief bounce after a softer U.S. inflation print eased Fed rate hike fears.
But the overhang could quickly reemerge if the broader relief bounce fades. Notably, an analyst warned further wallet distributions were likely in the coming days. If the recipients sell their received tokens, the additional supply could put pressure on PUMP’s price.
On the price chart, the token touched the upper Bollinger Band (BB) near $0.00016 as of writing. Any short-term pullback would likely retest the immediate support (white) at $0.00014 or the lower BB band.
PUMP faces an 18x supply overhang
Worth pointing out that PUMP has recorded aggressive buybacks, which have cleared 15% of the circulating supply. Currently, the project is removing an average of 5 billion PUMP tokens per month.
Compared to the total of 89 billion PUMP tokens unlocked, that would be 18x more supply overhang than the current buyback pace. So, if the entire tranche of released tokens hits the market in the coming days, the pressure could drag the PUMP price lower.
That said, there was only a minimal distribution from whale wallets with 1 million PUMP and 1 billion PUMP tokens (small dips in lines).
This meant spot selling pressure was still minimal, at least as of writing. However, if they offload more of the unlocked tokens, the recent recovery will likely stall.
Final Summary
- PUMP defied a $76 million token unlock distributed to team members and rallied 11% thanks to softer U.S. inflation data.
- However, there was an 18x more supply overhang than the PUMP buyback rate, which could exert pressure if more team members sell their tokens.
