Why DYDX insiders are unlikely to sell their $490M unlock

DYDX supply will climb by up to 80% after the Friday unlock, but a couple factors make a massive sell-off appear unlikely


Dydx founder Antonio Juliano | DAS New York 2022 by Blockworks


The perpetuals trading platform and layer-1 blockchain, dYdX, is set for a significant event on Friday. Founders, investors, and other key figures involved with the project will gain access to about 150 million previously locked DYDX tokens, currently valued at around $490 million. This unlocking event will increase the circulating supply of DYDX by roughly 80%.

Traditional wisdom says unlocks are bearish, since supply suddenly rises while demand stays static — but DYDX’s price rose 30% this month and open interest grew after dYdX’s chain went to beta mainnet on Nov. 14

Ultimately, some of the unlocked tokens will be difficult to sell, and doing so may not be the most profitable strategy for investors, who can stake DYDX for USDC rewards and hedge their bets with short positions. 

A majority of the unlocked tokens will go to past investors in dYdX, which has raised $87 million over four funding rounds, according to Crunchbase. 

Read more: dYdX tokenomics scrutinized as staking goes live

The tokens to be unlocked are also partly allocated in an Ethereum-native version of the token (ethDYDX). There is a one-way bridge for ethDYDX to the dYdX chain, meaning that if investors bridge their tokens to dYdX, they cannot move the tokens back to Ethereum. 

Some of the unlocked tokens will also be native DYDX and wrapped ethDYDX, the dYdX foundation told Blockworks.

Native DYDX holders would have trouble selling their tokens en masse, as DYDX does not currently trade on centralized exchanges. The asset is listed on Osmosis, a decentralized exchange in the Cosmos ecosystem.

However, according to data from CoinGecko, a mere $1600 worth of DYDX sales would lead to a 2% drop in its price. Consequently, attempting to sell large tranches of DYDX tokens would likely result in considerable price slippage, adversely impacting the asset’s value.

Regardless of whether the tokens are sellable, Matt Fiebach from Blockworks Research pointed out that DYDX perpetual futures are actively traded. Locked token holders can already hedge their exposure to the token with short positions, which he says is likely a more profitable strategy than dumping the tokens post-unlock.

Native DYDX can also be staked on the dYdX chain for USDC rewards after trading was enabled earlier this month

Representatives from dYdX investors a16z and Electric Capital declined to comment on whether the firms would stake their unlocked tokens. Multiple other dYdX investors did not return requests for comment. 

Other layer-1s that underwent token unlocks this month saw mixed results. Sui’s (SUI) price rose following its Nov. 3 unlock, while Aptos (APT) and Avalanche’s (AVAX) tokens slid following unlocks on Nov. 12 and 24, respectively.

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