The overcrowded short trade in the lead up to token unlocks is beginning to backfire, with several altcoins showing signs of strength into what is normally perceived to be a bearish event.

This week Axie Infinity (AXS) surged by 40% in the lead up to $64 million worth of previously locked tokens being unleashed on the market. This took onlookers by surprise as an increase in supply typically leads to a reduction in value, and also gives early investors or project team members an opportunity to liquidate their initial investment.

But AXS is not alone in bucking the trend – decentralized derivatives exchange dYdX’s cryptocurrency has outperformed its peers with a 64% rally this month in spite of a token unlock coming on Feb. 2. And Aptos, the token that underlies the layer 1 blockchain that came out of Facebook’s failed Diem project, has been a top performing asset since the turn of the year, surging by 283% despite a notable token unlock that took place on Jan. 12.

The magnitude of gains has rejuvenated the altcoin market as a whole, with CoinDesk’s DeFi Index (DCF), which tracks the price of 43 cryptocurrencies related to decentralized finance, printing a 49.35% increase since Jan. 1, surpassing the rise of the Bitcoin index, which is up by 37.92% over the same period.

CoinDesk - Unknown

DeFi Index (CoinDesk Indices)

According to Unlocks Calendar, a website that tracks upcoming token unlocks, the trend is being caused by projects withholding positive news until sell pressure climaxes before a scheduled unlock.

“As we experience positive market momentum, teams with upcoming unlocks will release good news that they withheld for months when the market was dead,” Unlocks Calendar tweeted on Jan. 14. “The goal would be riding positive market moves to pump the price just before unlocks.”

There is also a sophisticated trading element to the value increase. Historically, in the cases of the IMX and APE tokens late last year, token unlocks caused a period of downside price action. This prompted traders to short the tokens before the event, but based on the recent flurry of short liquidations on AXS, it appears this trade has become overcrowded, leaving it vulnerable to the other side due to a lack of liquidity.

Liquidity across altcoins is significantly thinner than for major crypto assets such as bitcoin and ether. Market depth, which quantifies liquidity by working out how much capital is needed to move an asset in each direction, is currently at $49 million for a 2% move on bitcoin, whereas only $357,520 is needed to move AXS 2%, according to CoinMarketCap.

This means that when short positions pile up leading into an event, astute traders can capitalize on thin order books by initiating a short squeeze by purchasing the asset and going long. The short positions then either get liquidated or force closed, which triggers positive momentum to the upside.

The entire cryptocurrency market cap has risen by over $250 billion since Jan. 1 to $1.05 trillion, caused in part by a resurgence in the speculative altcoin market, a move commonly referred to as “alt season.”