Security Token Exchange

Bitcoin climbed past $26,600 on Thursday afternoon, its highest price this week, and ETH moved closer to the $1,700 level. 

The gains in crypto mirrored a big move higher in traditional markets while the U.S. 10-year Treasury yield declined a bit to 4.19%. Chipmaker giant Nvidia, in particular, jumped after reporting $6.2 billion in net profit for its second fiscal quarter— double compared to the same period a year ago. The company’s strong results were fueled by 141% sequential growth in its data center segment, where it produces GPUs for high-performance computing and cloud applications and raked in a record $10.3 billion in revenue from this alone.

With this, Nvidia’s shares climbed to an all-time high (ATH), up more than 250% this year so far, and its market cap hit $1.18 trillion, surpassing the entire crypto market this week. Wall Street’s AI-darling also boosted the price of AI-related tokens like FET, AGIX, and RNDR.

Since then, crypto assets have given most of their gains, the largest cryptocurrency is back to trade at around $26K this Friday, and ETH is exchanging hands for around $1,653. The total crypto market cap is also down by 1.2% to $1.092 trillion.

Crypto market analysts expect this downtrend to continue for weeks, especially given the seasonality of September and the lack of liquidity and participation.

However, according to on-chain analytics company Santiment, the current downturn market is likely to reverse soon. The potential rebound of cryptocurrencies could be due to the fact that crypto traders are now showing FUD and increasingly calling the current state of things a “bear market.” Historically, this has led to substantial price surges of crypto, according to Santiment.

Crypto investment firm Pantera Capital is also of the same view, forecasting that BTC likely won’t stay at these depressed price levels for much longer, given that it has recently “experienced the longest period of negative year-over-year returns in its history, lasting 15 months.”

Click here to learn all about investing in DYDX.

DeFi Sector Contracts

When it comes to the decentralized finance (DeFi) sector, the total value locked (TVL) has fallen to its lowest level since February 2021, as per DefiLlama. During the bull market of 2021, the hype drove TVL to a peak of $180 billion. 

This year, the crackdown on crypto by the US regulators has made traditional finance players nervous about the DeFi space. As a result, several protocols have lost more than half of their locked value in the past month alone. For instance, DEX Balancer saw its TVL drop by 35%, while Optimism-based DEX Velodrome declined by 58%.

Another potential reason has been the U.S. Treasury yields are rising while the DeFi yields, which are higher risk, are giving lower rewards. Then there’s the crypto-wide issue of liquidity, which is affecting the volumes of major DEXs, as seen by Curve and Uniswap.

A decentralized exchange or DEX is a peer-to-peer marketplace where transactions occur directly between crypto traders without the involvement of an intermediary like banks, brokers, or payment processors.

However, unlike centralized exchanges (CEXs) like Binance and Coinbase, DEXs don’t allow for exchanges between fiat and crypto but rather exclusively trade crypto for other crypto. While CEXs use order books, DEXs are simply a set of smart contracts and use “liquidity pools,” in which investors lock funds in exchange for interest-like rewards to facilitate trades. 

dYdX is one such popular DEX that is backed by the likes of Paradigm, a16z, and Polychain Chain and has raised a total of $87 million, as per Crunchbase. The popular DEX has been making a lot of development this year. However, its token isn’t unaffected by the brutal bear market.

DYDX Token Maintains Greens

With a market cap of $373 million, DYDX is among the top 100 cryptocurrencies which, at the time of writing, has been trading at $2.16, down 1.6% in the past 24 hours while managing 100 million in trading volume, up 20% from a day ago. 

Despite these small losses, the DYDX token is up 10% in the past week and 3.4% in the past month. Recently, on its upward move, DYDX surpassed the 200-day EMA. Technically, if the token moves up, it is currently facing immediate resistance at $2.30 and $2.50, while in the opposite direction, it has support present at $2.00 and $1.70.

This year has been a mix for the DEX token, much like the broad crypto market. It started the year on a positive note as it jumped 200% in the first month it went from about $1.10 to $3.30 on Feb.2. However, since then, it has been pretty volatile as the price dropped under $2 in mid-March and though it went past $3.16 over the next month, it dropped back down to $1.50 in June.

Now, for the last two months, the price has been trading in the range of $1.80 and $2.20. Still, DYDX’s price is up 95% year-to-date (YTD) and in the green by 17% over the past year. 

DYDX is the governance token of the trading platform dYdX, which has a total supply of 1 billion, of which a mere 173.23 million tokens are circulating in the market. 

The protocol was founded in 2017 by ex-Coinbase and ex-Uber engineer Antonio Juliano with the launch of the Layer 1 product, which supported lending, borrowing, and margin trading on Ethereum. In Feb. 2021, dYdX launched a closed alpha for its new Layer 2 cross-margined Perpetuals product built on StarkWare’s StarkEx scalability engine, and then a couple of months later, the product was launched to the public. 

Zug-headquartered dYdX Foundation is a non-profit organization that deploys governance smart contracts and issues the DYDX token. The token hit its ATH at $27.86 in Sept. 2021, but since then, it has lost 92.3% of its value. Last year in June, DYDX plunged to its all-time low of $1.01, as per CoinGecko.

DYDX creates an ecosystem around rewards, governance, and staking to propel dYdX’s growth and decentralization.

There’s also a community treasury, which has 5% of the initial token supply to fund programs and initiatives that propel dYdX forward and create funding programs to support community hackathons, analytics dashboards, memes, translations, NFTs, and other initiatives. Currently, the value of the dYdX treasury is $77.77 million, as per DeFi Llama. 

Much like other DeFi platforms, the TVL of dYdX has fallen significantly from its $1.12 bln peak during the bull market to just under $340 mln as of writing. The platform’s number of daily active users has also declined from hundreds in 2021 to now under 100. The number of daily transactions on the DEX has also been constantly declining this year, keeping between 100 and 400.

dYdX Exchange Continues to Develop

Decentralized derivatives exchange dYdX native token’s weekly gains came amidst the bullish accumulation. The number of Smart Money wallets holding the token has been steadily increasing their exposure, hitting a high of over 47.8 million tokens.

According to a Nansen report, the token has been witnessing buying from heavyweights like Wintermute Trading, Cumberland, CMS, and Sigil Fund over the past three months, with 585 wallets more than doubling their holdings by adding tokens worth $22.7 million.

Talking about the distribution of the ‘DYDX Bulls,’ the report noted that it has been split between new and old wallets, with over 42% of addresses created in 2023 and the remaining 58% being active for over a year or more.

Nansen’s report then went on to mention the “potential investor activity,” suggesting that an investment round may be in the works due to some wallets receiving tokens directly from the investor distribution wallets and the Foundation.

DYDX’s gains also came in anticipation of the project’s soon-to-be launched Cosmos-based blockchain for its forthcoming v4 iteration, which is described by some as “highly ambitious.” Its public test network on Cosmos was first launched early last month. With this, dYdX is gearing up to leave the Ethereum ecosystem and nearing the mainnet launch of its new blockchain, slated for the end of September.

Over a year ago, the dYdX Foundation first announced the migration of the exchange to an independent blockchain built using Cosmos software developer kit (SDK). The team launched its second testnet version of its new Cosmos-based chain earlier last week, staying on track for its roadmap. This testnet introduced more than 30 markets on the platform, distributing testnet tokens to reward users and several back-end upgrades. 

The platform is also taking a stand against the insidious practice of Maximal Extractable Value (MEV) ahead of its migration. Earlier in the week, the dYdX Foundation published a list of preferred practices for dYdX Chain validators and stakers, including ensuring a “fair and honest trading experience” for users by shunning MEV activities that could disadvantage or harm its participants.

It further warned that validators engaging in malicious MEV will face punishment, alongside encouraging social measures to disincentivize MEV extraction altogether. The foundation said delegates could also face repercussions should they support validators engaging in extractive MEV.

“Aligning on potential good practices for validators could be important in guiding responsible participation and decision-making within the dYdX Chain ecosystem,” the team said.

The Cosmos stack has been chosen to build a product with performance and UX on par with the top CEXs. Trading volume on dYdX already surpasses its DeFi counterparts, and its average monthly derivatives volumes since December 2022 exceed that of Deribit, Kraken, and Bitfinex but lags behind giants like Binance, OKX, Bitget, and Bybit. 

Back in early June, the platform recorded a jump in its volume, and the token had a surge in price after the U.S. Securities and Exchange Commission (SEC) sued Binance for violating federal law.

The platform has actually been boasting over half a billion dollars in daily volume. If we look at the platform’s daily volume, it surpassed $9 billion in late Sept. 2021 when the dYdX team announced the $250k trading competition. Through that year, its derivatives volume continued climbing and remained high in the first half of 2022, but since then, it has been slowly making its way downwards. 

dYdX’s monthly derivatives volume hit its ATH in Oct. 2021 at $106.95 bln, as per DeFi Llama. In 2022, the highest monthly volume was in Feb at $73.98 bln, and the lowest was in Oct. at $17.56 bln. Now, in March, the collapse of traditional financial banks saw dYdX hitting its 2023 high at $43 bln, while the lowest was in May at $19 bln. So far, in August, the platform has done $13.8 bln in volume. 

This drop in volume has resulted in the platform revenue declining as well. In the past 30 days, the revenue, which is the share of trading fees that goes to the protocol, has fallen 32.44% to $4.14 million, while annualized revenue is down by 21.47% to $50.38 mln, as per Token Terminal. 

Besides all this, about a month ago, dYdX’s community members voted to slash rewards to liquidity providers in order to save the business $1 million a month and slow the issuance of its DYDX token. The amount of DYDX given to liquidity providers per epoch was cut down to 575,342, and overall, DYDX token emissions by roughly 25%. Based on the laws of economics, less issuance is a net positive for DYDX’s price.

Overall, the derivatives exchange is gearing up for a big upgrade, which can result in the price of DYDX recording an uptrend in the near future. However, several on-chain metrics are showing a relatively bearish picture, which makes sense in the current crypto-wide downturn. Still, the exchange has managed to see volume and revenue while focusing on development, which can help the platform grow when the activity returns in the crypto market.

Click here to learn all about buying DYDX.