dYdX Token Could Sink Ahead of a Major Unlock Event

The dYdX crypto token price has been in a recovery mode in 2023 but there is a major risk ahead. The token soared to a high of $1.90, which was the highest level since December 15. It has jumped by over 78% from the lowest level in 2022.

dYdX has poor tokenomics

dYdX is an important company that operates in the blockchain industry. It is one of the biggest decentralized exchanges (DEX) in the world, handling billions of dollars in any given day. dYdX is built on Ethereum’s chain although the developers are working on their chain that will be hosted on the Cosmos ecosystem

dYdX token is used for the network’s governance. Holders of the token can participate in key issues of the network. It also acts as a discount utility, meaning that holders can receive discounts when using the ecosystem. However, the latter point is not all that important since dYdX has some of the lowest costs in the industry.

A key risk of investing in the dYdX token is that it has some of the worst tokenomics in the industry. 50% of the tokens went to the community while 25% of them went to provide trading rewards. The rest of the tokens went to retroactive mining rewards, liquidity provider rewards, community treasury, staking USDC, staking dYdX, investors, and founders and employees.

A key challenge for dYdX is that more tokens can be minted after 5 years. This means that this minting will happen in 2026, which will depreciate the value. With a 2% inflation rate, dYdX has one of the worst inflation figure in the industry.

Token unlocks

The next key catalyst that will push dYdX token is that there will be a massive unlock on February 3. This unlock will open 150 million or 15% of all tokens in circulation. This means that the overall, supply of these tokens will increase. In economics 101, an increase in supply leads to a lower price.

Therefore, since dYdX has a market cap of over $207 million, it means that dividing by the new supply will value the token at $0.70, which is much lower than the current $1.90. At the same time, daily trading rewards rises by about 3.8 million tokens every month. In total, about 5.6 million tokens. And some analysts expect that its liquidity will rise by 5x from where it is today. As such, this could see the token price continue slumping.