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

article-image

Dydx founder Antonio Juliano | DAS New York 2022 by Blockworks

share

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.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Continued demand for bitcoin ETFs coupled with greater demand for bitcoin from exchanges is contributing to price moves, analysts say

article-image

Morpho Blue is designed in a way where risk management is externalized, Morpho Labs’ CEO said

article-image

Snowflake, a cloud-based data warehouse solution, has partnered with Dune to make curated blockchain data available to its clients

article-image

Crypto is fast and it’s only getting faster as bitcoin threatens to retest its own highs set more than two years ago

article-image

The settlement ends the legal battle over eth.link, a domain once owned by imprisoned developer Virgil Griffith

article-image

TBC President Lee Bratcher told Blockworks he’s “confident” about the Council’s case against the DOE