This Altcoin Became a Victim of Unlock: The Price Crashed!

In a momentous move, Layer-2 decentralized exchange dYdX unlocked 150 million DYDX tokens worth approximately $478 million today. This unlocking event has raised concerns about the potential increase in altcoin supply and its impact on DYDX prices. Here are the details…

DYDX increases altcoin supply

DYDX unlocked 150 million DYDX today. This is worth approximately $478 million. Investors are monitoring the situation closely and expressing concerns that the influx of tokens into the market could lead to a significant increase in supply. If demand does not match this increase, a pullback in DYDX prices could be triggered and the gains observed over the last few trading weeks could be reversed. Bubblemaps data reveals that more than 50% of unlocked DYDX tokens, equivalent to $478 million, were allocated to venture capitalists (VCs), including Paradigm and Polychain.

VCs initially poured $100 million into the layer-2 decentralized exchange and distributed these tokens to private investors through various wallets, including Coinbase Custody, Investor Distribution, and Foundation Wallet. To address concerns, the dYdX team developed a strategy to alleviate the expected selling pressure. The initial unlock will release 30% of the total amount, followed by equal monthly releases for the next three years. This approach aims to distribute unlocked tokens gradually, potentially limiting the impact on DYDX prices.

What is the latest situation in DYDX?

As of now, DYDX is trading above $3, reaching levels last seen in February 2023 and technically indicating a bullish trend. However, the imminent unlocking of the token overshadows the positive momentum, raising concerns among investors. It is worth noting that dYdX had previously postponed the token unlock by ten months, from February to December 2023. This delay initially contributed to an increase in DYDX prices, but consolidations later occurred in the 2nd, 3rd and early 4th quarters of 2023. A significant rally occurred in late October 2023, with DYDX up 82% from October highs.

While there is speculation that prices may drop during or after the unlock event, some optimists believe that a significant portion of the unlocked tokens could go to the team and investors, potentially providing support. Additionally, the trading behavior of team members and venture capitalists who trade less frequently compared to retail investors may help reduce expected liquidation pressure. As the token is unlocked, data from blockchain analysis platform Lookonchain reveals significant movements of DYDX to cryptocurrency exchanges such as Binance. Major whales associated with the dYdX Foundation initiated transfers, sending millions of DYDX tokens to various addresses.