How Does the Lock-up Period for Staking Affect the Token’s Market Liquidity?

A lock-up period for staking, during which tokens cannot be traded, directly reduces the circulating supply available on the market, thereby decreasing the token's market liquidity. This illiquidity can lead to higher price volatility, as fewer tokens are available to absorb large buy or sell orders.

While lock-ups are designed to secure the network and incentivize long-term holding, they create a trade-off with market efficiency.