Does DYDX have a chance to increase in price before the major unlock? What factors will influence the price increase? Who is the market maker for DYDX this time? Which top EOAs are accumulating? Are smart money and funds accumulating, and if so, how much and at what price? How will the Cosmos ecosystem benefit?

SUMMARY

EOA holders (excluding smart contracts and exchanges): are actively accumulating $DYDX with approximately 19.3M DYDX (~$48M).
VCs: Tend to hold $DYDX long-term and accumulate more $DYDX.
December 2023 will see a massive token unlock (150M DYDX) for investors, accounting for 96% of circulating supply. Therefore, we can expect a new price increase before the unlock.
Cosmoverse 2023, taking place from October 2nd to 4th, 2023, could be the launch date for dYdX V4, which will attract capital flow into the Cosmos ecosystem.

WHY IS DATAFI ANALYZING DYDX?

In the Q2 2023 report by Genesis Trading, published on August 10, 2023, data on spot and derivatives trading volume showed significant growth in derivatives. They concluded that the derivatives market is ready for strong growth.

Source: Q2 2023 Report by Genesis Trading

That's why DataFi chose to analyze dYdX - the leading project in the DeFi derivatives market. Notably, dYdX V4 has launched its public testnet on August 15, 2023, and may go live on the mainnet in the next 1-2 months. Note:

dYdX is built using the Cosmos SDK.
A major event for the Cosmos ecosystem, Cosmoverse 2023, will take place on October 2nd to 4th, 2023, which could also be a milestone for the official launch of dYdX V4.

Let's explore DYDX with DataFi and analyze its on-chain data to see if the market is bullish or bearish before these events.

I. OVERVIEW OF DYDX

WHAT IS DYDX?

dYdX is known as the pioneering and largest decentralized derivatives exchange on Ethereum. Currently, dYdX is using StarkEx's solution - a layer-2 scaling solution for Ethereum (ZK rollup), developed by StarkWare, which is faster and has lower fees.

Additionally, dYdX is also a prominent name in the Perpetuals DEX sector, currently holding about 60% market share with nearly $1B in daily trading volume.

Source: Artemis

ROADMAP AND FACTORS DRIVING PRICE INCREASE

dYdX V4 - their own blockchain built on Cosmos SDK - is expected to be released in the near future. This is considered a significant update with the goal of achieving decentralization, no longer dependent on any organization, including dYdX Trading Inc. Currently, dYdX V4 is in Phase 3: Public Testnet.

What investors are interested in are the factors that could drive the price of DYDX up. From DataFi's perspective, we see:

With the launch of dYdX V4, dYdX Trading Inc will not receive revenue based on the protocol's trading fees but must stake DYDX. This means the project team will have to consider holding more tokens to receive the above revenue.
The operation of dYdX V4 requires a sufficiently large amount of DYDX to be staked to ensure security and safety. This could potentially lead to significant buying pressure from validators. In fact, there have been signs of that demand when looking at top Cosmos chains including OSMO and RUNE - about 1/3 of the circulating supply has been staked.

II. DYDX ON-CHAIN REVIEW

GENERAL DATA

Supply:

Total supply is 1,000,000,000.
Circulating supply is 156,256,174 (15.63% of total supply).

The current circulating supply is quite small, so despite having a fully diluted valuation of nearly $2B, the current market cap is only around $300M. This is a good feature when considering whether a token is easy to pump or not.

Tokenomics of DYDX:

Earlier this year, the unlock of 150M DYDX (twice the circulating supply) for the team and early investors was postponed to December 2023 (the old schedule was February 3rd, 2023). Currently, there are 3 months and 13 days left until this major unlock. Could we expect a short-term price pump for dYdX?

Source: Token Unlock

There are two ways to forecast:

(1) Look at how DYDX price historically reacted to the old schedule:

The price increase data is compared to BTC, but the market was euphoric at the time, which could cause altcoins to increase in price more strongly than BTC, so relying on the past is just a sentimental basis:

In early November 2022 (3 months before the old expected unlock): DYDX price increased by 110% when centralized exchanges were experiencing FUD.
Before the announcement of the unlock delay on January 27th, 2023: DYDX price increased by 123%.
At the time of the old unlock on February 3rd, 2023, DYDX increased by 198% compared to 30 days prior.

Below is the price of DYDX/BTC in the 4 months before the old expected unlock:

Source: Tradingview

(2) Explore on-chain data:

In theory, this major unlock event raises concerns about a potential decrease in DYDX's price. However, what is the actual investor sentiment? Are they fearful or greedy? Our team has examined on-chain data and found that the primary sentiment is accumulation. Details can be found in the analysis of wallet groups below.

ANALYSIS OF WALLET GROUPS 2.1. TOP EOA WALLETS Analyzing the 50 EOA wallets with the most significant balance changes in the past 30 days, we see that most addresses are increasing their token holdings. Specifically:

46 wallets increased their token count, with a total increase of 19,939,212 DYDX ($39.09M)
Only 4 wallets decreased their token count, with a total decrease of 649,983 DYDX ($1.27M)

Source: DataFi Research

The increase in DYDX mainly comes from new wallets and wallets older than one year:

Wallets less than one month old increased by 12.2M DYDX, possibly short-term investment behavior for the upcoming growth of DYDX.
Wallets older than one year also recorded a strong increase in balance, up 4.4M DYDX. Notably, these are the addresses of funds that invested early in DYDX, as detailed in the fund wallet review section.

The question is whether the increase above comes from buying or just receiving rewards. Upon investigation, DataFi found that DYDX has been withdrawn from exchanges over the past six months, suggesting it might be from buying rather than rewards. This trend continues in August.

Exchange Netflow of DYDX. Source: Alpha.thedatafi.com

Conclusion: Positive on-chain signals from holders as most are increasing their balance.

2.2. SMART MONEY GROUP

Balance data of smart money wallets shows that this group is still accumulating, with the balance doubling in the past year to 47.2M DYDX (~ $92.5M).

Over a 30-day timeframe, the general trend is still accumulation with an additional 613K DYDX, although 137K DYDX was transferred out in the past two days, possibly due to negative market influences.

Source: Alpha.thedatafi.com

2.3. FUNDS GROUP

The Funds group tends to hold DYDX long-term and shows no signs of reducing their holdings. Additionally, as mentioned in section 1 regarding the top 50 EOA wallets, early investors (over one year old) are the group accumulating strongly. Among them, Wintermute Trading, Cumberland, and CMC are the funds with the most substantial accumulation. Details are as follows:

Cumberland Fund The fund has withdrawn DYDX from Binance to its wallet in the past two months. Two identified Cumberland wallet addresses hold 2.25M DYDX (~ $4.5M):

0xad6eaa735d9df3d7696fd03984379dae02ed8862: 713,240 DYDX withdrawn from Binance on July 13th at a price of around $1.86
0xaa3d56e9695f75eecd6e3e78546154b727147b8a: 1,539,761 DYDX received on June 29th and July 26th at prices of $1.95 and $2.04 respectively

Source: Alpha.thedatafi.com

CMS Fund In August 2023, CMS accumulated an additional 770K DYDX (~$1.5M), bringing the total holdings to $5M. This DYDX was withdrawn from Biget and Binance at a price of around $2.15.

Notably, in April, CMS also accumulated DYDX before the price pumped to $3 on April 18th (estimated ROI ~25%).

Address: 0xafa64cCa337eFEE0AD827F6C2684e69275226e90

Source: Alpha.thedatafi.com

Wintermute Trading Fund Wintermute also saw a significant increase in balance, but there are no signs of accumulation, only receiving 9,120,069 DYDX (~$18M) from the "dYdX: Safety Module" wallet and partly from protocol rewards. This suggests a positive signal that Wintermute might be a market maker (MM) for the project.

Source: Alpha.thedatafi.com

III. dYdX V4 & COSMOS CHAIN

At the end of Q3 2023, dYdX will transition from Starkware to a new blockchain (dYdX V4) built using the Cosmos SDK. They have deployed a private testnet in recent months, recently launched a public testnet, and it seems to be working well.

However, the transition from Starkware to Cosmos might lead to the loss of some existing users. Therefore, dYdX might need some campaigns to attract users and bring assets in, which could both drive the price of DYDX up and positively impact the Cosmos ecosystem.

With the upcoming mainnet, the funds on DEX Perpetual platforms will gradually flow into the Cosmos Ecosystem, benefiting tokens in this ecosystem significantly. Currently, the trading volume on dYdX is around $1 billion per day.

If we compare this to the 24h volume of 60 IBC zones on Cosmos, which is $15M (data from map of zone), we can see how lively Cosmos would become with the influx of dYdX users.

To illustrate this opportunity, DataFi takes the example of Luna's growth with the stablecoin UST, demonstrating how it attracted a large amount of funds into the Cosmos Ecosystem.

Comparing the price growth of tokens on Cosmos (ATOM, RUNE, LUNA, BAND, KAVA, KDA) with BTC, ETH from December 2021 to April 5th, 2022 (the day LUNA reached ATH), we see:

Tokens on Cosmos had stronger growth than BTC and ETH, specifically: RUNE (+119.13%), LUNA (+75.78%), ATOM (+67,59%), KAVA (+22%), BAND (+4%), KAVA (+4%), … Meanwhile, at that time, BTC was at -3.9% and ETH was at -14%.

Performance of projects in the Cosmos ecosystem: ATOM, BAND, KDA, RUNE, LUNA, KAVA

Source: Tradingview

Performance of LUNA compared to BTC, ETH in the same period

 Source: Tradingview

Cosmos Universe Some notable projects on Cosmos currently:

SEI: A newly listed project on Binance, currently having an Airdrop program with bridging tasks on Cosmos. This program caused the price of ATOM, OSMO to increase by 20% within an hour of the announcement.
OSMO: The main DEX on Cosmos.
INJ: A blockchain focused on developing exchanges. Notably, recently, with the collaboration with an Oracle project,
RUNE: Developing cross-chain transactions between different blockchains.
LUNA: In 2022, LUNA increased 5x and reached ATH in just one day on the Mid-Autumn Festival, August 15th of the lunar calendar.

IV. CONCLUSION

(1) Currently, top EOA wallets (including large funds) are tending to bet on the upcoming increase of DYDX. However, we also need to be aware of some factors that could cause the price of DYDX to decrease, such as further delays or incidents during the mainnet launch of dYdX V4, and dilution pressure from the unlocking of DYDX.

(2) The Cosmos ecosystem may receive funds from investors currently trading on dYdX.

Disclaimer: This analysis is not financial investment advice.