The exact details of the allocation of unlocked shares are crucial.
Written by: 1912212.eth, Foresight News
Token unlocking, especially the one-time unlocking of "huge amounts" of tokens, is often seen by the market as a signal of huge selling pressure. Although the negative effects of unlocking are not pessimistic in the research reports of research institutions, we always lack sufficient "evidence" to prove everything. About half a month ago, the DYDX token ushered in a one-time unlocking of a considerable amount. By observing the market performance before and after this unlocking, and comparing the performance of the two large unlockings of AVAX and 1INCH, we have drawn some "proven" conclusions that are not rigorous but have certain persuasiveness.
Before reviewing the market performance, let me first state the conclusion: the unlocking of large amounts of tokens does have a direct impact on the token price, but the specific distribution details of the unlocking shares are crucial. If the proportion of "capital parties" such as investment institutions in the large-scale unlocking is high, then there will be obvious price pressure and decline after the unlocking. If a large number of unlocked tokens belong to "user parties" such as the community, then the "negative impact" brought by the unlocking will be significantly smaller.
Review of the market performance before and after the huge DYDX unlock in early December
In January 2023, dYdX originally planned to unlock 150 million tokens (worth over US$200 million at the time) on February 3, but the official announced that the plan would be postponed to December 1. After the news was announced, DYDX rose by nearly 25%, and then rose by nearly 20% the next day, surging all the way.
The DYDX tokens unlocked in December accounted for 81.63% of the total circulating supply, of which 83.19 million DYDX were unlocked to investors, accounting for 55.5% of the unlocked shares, that is, more than half of the unlocked tokens belonged to investors.
After that, the price fluctuations of the currency also followed the ups and downs of the market. We saw that after the end of the bull market in the first half of the year, it began its own consolidation and oscillation range.
According to the original plan, the dYdX Chain mainnet should be launched at the end of July with a public beta network and at the end of September. However, due to progress issues, the testnet was postponed to August-September, and the mainnet was postponed to October.
The final official launch date is October 27. This node reserves 1 month for the subsequent pledge tokens and migration tokens. From the perspective of the project, it hopes to offset some of the impact of the huge selling pressure.
Let us first determine the basic situation of the overall market. The Bitcoin market has been rising since October, around 27,000U, and has performed quite well, without any interference from factors such as a sharp correction.
We can see that dYdX bottomed out at 1.8 USDT in the two weeks before October 27, and then surged to 2.3 USDT around the time of the official launch of the mainnet, and then fell back to the high point when it was launched.
Entering November, as there was still a whole month before the unlocking, and the overall market performance was also quite impressive, DYDX started to rise all the way, from 2.2 USDT on November 2 to 4.36 USDT. At this time, it was November 15, and there was still half a month before the unlocking.
Let's see what other positive factors DYDX has released during this period, besides benefiting from the overall good market?
On October 31, dYdX users can bridge DYDX on the Ethereum chain to the dYdX Chain (Note: transfer back is not supported for the time being)
On November 3, the cross-chain volume exceeded 60.8 million ethDYDX, and the total staked volume exceeded 1 million
There were only two not-so-conspicuous positive news, but the inflow of funds into the market was quite strong.
The next performance is of utmost importance.
Before unlocking
After reaching the high point, the community was constantly criticizing due to the impact of YFI liquidation on November 19, and the price of the currency soon fell to around 3 US dollars. As the unlocking time approaches, we see that the price has always fluctuated around 3 USDT. Some profitable funds are also fleeing early.
It is worth mentioning that in order to prevent the YFI incident from happening again and improve trading depth and experience, Chaos Labs has partnered with dYdX to launch a $20 million liquidity incentive program to promote early adoption and smooth transition of dYdX Chain. The program will last for about six months and aims to encourage diverse participants to migrate and interact with dYdX Chain.
Unlock "After"
Some of the locked tokens of investors were transferred across chains to dYdX Chain for staking one week before the unlocking. This again caused dissatisfaction in the community, who believed that the unlocked funds should not be staked in advance to compete with retail investors for profits.
On the other hand, since this part of the transferred funds does not support exchange recharge, the selling pressure will also be relatively reduced.
As an investor in dYdX and founder of DeFiance Capital, Arthun specifically tweeted on the X platform to hint at DYDX: unlock bullishness.
Is this really the truth?
The negative impact on the unlocking day has indeed been almost digested, with the daily decline only around 5%, and even a rare surge of 10.56% on the second day. However, since then, it has begun to fall all the way. As of press time, the coin price is 2.8 USDT. If calculated based on 3.2USDT on December 1, it has fallen by 14%. If calculated based on the high of 4.36USDT on November 15, the decline is as high as 55.7%, which has been halved.
Let’s focus on the players who can be found selling coins in public (assuming that the act of recharging to the exchange is selling coins).
On December 1, an address associated with the DYDX Foundation transferred approximately 5.6 million DYDX tokens (worth approximately $18.3 million) to Amber Group and ultimately to crypto exchange Binance.
On December 1, some investors sold 7.5 million DYDX ($23.3 million) through Wintermute and Amber.
On December 3, three whale addresses deposited 4.08 million DYDX ($13.9 million) into the exchange in the past 12 hours.
On December 4, the address starting with 0xb0d related to Amber Group deposited 2.25 million DYDX to Binance, about $7.75 million. On the same day, nearly 800,000 DYDX were transferred in, about $2.7 million.
On December 12, Three Arrows Capital liquidation company Teneo just deposited 4.45 million DYDX to Binance, worth approximately US$12.73 million.
The number of publicly available sales is conservatively estimated at 28.76 million, with a total selling pressure of $78.68 million. If DYDX is priced at 2.75U on December 13, it has fallen by 16.36% since December 1.
In the short term, the huge amount of token unlocking will indeed bring selling pressure.
Comparison of market performance before and after large-scale unlocking of other popular projects
Let’s compare it with AVAX in recent time periods. On November 24, more than 9.55 million tokens (about 217 million) were unlocked, of which 2.25 million were unlocked by individual investors, accounting for only 23.56%, which is relatively not a high proportion.
Let's look at the recent trend chart of AVAX. It has been stable before and after unlocking, and even broke through 40USDT on December 12, setting a new high since 2022. On November 12, FTX liquidators deposited 916,780 AVAX (about 20.7 million US dollars) into Binance, which did not even cause a big impact.
The opposite case is 1INCH, which unlocked more than 98.74 million tokens on December 1, all of which were unlocked by the team and VC, and 0 were unlocked by the community.
The result is obvious. Whether before or after the unlocking, the market has obvious selling pressure and the performance is weak. After slowly rising above 0.42 USDT on December 9, it turned around and fell again to the coin price on the day of unlocking.
Summarize
Under the condition of good market conditions, if the proportion of investors in the huge amount of tokens unlocked is high, it will cause a certain amount of selling pressure on the market in the short term. Although it is not as negative as the public imagines, it still creates considerable resistance to the rise in the price of the currency.
Large-value unlocking projects worth paying attention to recently
On December 12, Aptos unlocked 24.84 million APTs (about US$209 million), accounting for 8.9% of the circulating supply; among them, investors unlocked 8.42 million, accounting for 33.9%.
On December 17, ApeCoin will unlock 15.6 million APE (about 28.08 million US dollars), accounting for 4.23% of the circulating supply, mainly for the founding team.
On December 27, YGG will unlock 16.69 million tokens, of which 3.2 million will be for investors, accounting for 19.17%, and 7.01 million will be for the community, accounting for 42%.
On December 30, OP will unlock 24.16 million tokens, of which 11.41 million will be for investors, accounting for 47.23%, and 12.75 million will be for core contributors, accounting for 52.77%.
