Elastos, the blockchain-based project that claims to be building out the safe and reliable internet of the future, has announced a premature end to its token lock-up program, with founder Rong Chen citing the potential for it to be deemed “out of sync with [Western] compliance” regulations the primary motivation for doing so.
In today’s post addressed to the Elastos community, Chen explained how his project was “informed that the continuation of this program may cause compliance risk” at some stage in the future. And so, on November 5th Elastos will return all locked-up coins, including a 4 percent bonus, to lock-in ELA holders. Then, on November 20th, ELA coins will be returned to angel investors.
After consulting with trusted advisors within the Elastos ecosystem, including legal experts, we have made the decision to unwind our lock-up program and end it early.” – Rong Chen (Chairman, Elastos Foundation)
The ELA investment community took little time to express their discontent with Tuesday’s announcement, with the U.S. dollar value of ELA plummeting by roughly 15 percent shortly after its publication. Such a depreciation saw Elastos fall outside the top hundred cryptocurrencies (by market cap); a rare occurrence in recent months.
Whilst there are normally multiple factors contributing to price behaviour, it is plausible to suspect that many ELA holders felt slighted by the on-the-fly reversal of what is considered an important factor for many prospective crypto investors, that is, the enforcement of a token lockup period.
Certainly, when the initial coin offering (ICO) space was more primitive, untold amounts of crypto investors suffered financially due to their invested project’s teams having not bothered to force their early-stage investors to sign a token lockup agreement.
Now aware of how important token lockup periods are to the price stability of a given cryptocurrency, it is possible that fearful holders of Elastos’ ELA have pre-emptively sold their positions.
Of course, these fears of a large-scale market sell-off when ELA coins are returned in the coming weeks may never eventuate. Indeed, it is arguably just as possible that Elastos’ early-stage backers are as emotionally invested in the project’s ambitious vision as they are financially, and therefore will retain their entire ELA position.