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DYDX Price Plummets After 630-Day Pattern Breakdown – 33 Million Token Unlock Adds to Bearish Sentiment

Last Updated May 1, 2024 12:16 PM
Valdrin Tahiri
Last Updated May 1, 2024 12:16 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • 33 million DYDX tokens will be unlocked today, the fifth time it has happened this year.
  • The DYDX price has fallen over 55% since its yearly high of $4.52 on March 7.
  • DYDX broke down from a long-term ascending parallel channel in the beginning of April.

The DYDX price has not performed well since the start of 2023, increasing by less than 100%. The bearish sentiment worsened after the price broke down from a long-term parallel channel in the start of April.

With an upcoming token unlock on May 1, the article analyzes the impact of previous such unlocks, attempting to determine if they will exacerbate concerns coming from the price breakdown.

DYDX’s Unlock Schedule

33.33 million DYDX will be unlocked today, which is 11% of the circulating supply. From the maximum supply of one billion tokens, roughly 30% is circulating. The maximum supply will be reached over the next five years, with the highest portion of the allocation  going to investors.

Even though more than half the total supply is unlocked , roughly 200 million tokens are allocated to the community treasury, so they are not considered part of the circulating supply.

 

DYDX Allocation
DYDX Allocation | Credit: DYdX

 

As part of the unlock schedule, there will be six unlocks of 33 million tokens between January-June 2024. Then, there will be smaller unlocks of 5.67 million tokens from July 2024 to June 2025, and even smaller ones of 4.16 million from July 2025 to June 2026, completing the full five-year schedule.

DYDX Vesting Supply Schedule
DYDX Supply Schedule | Credit: DeFiLlama

 

There have been four unlocks of 33 million DYDX tokens so far this year. Below, we will look at the DYDX price action on those days to whether or not there is a correlation.

DYDX Price Movement During Token Unlocks

The four previous DYDX unlocks happened at the first day of each month in 2024. The DYDX price increased in January, February and March (green) but fell in April. Today, the price is creating a bearish candlestick (red). So, from the data, it seems that there is a price increase during unlock days, though the data is not sufficient to arrive at a conclusion.

DYDX Price During Token Unlocks
DYDX/USDT Daily Chart | Credit: TradingView

Although conventional wisdom suggests that an increase in supply typically leads to a decrease in price, the token unlocks could potentially generate renewed interest in DYDX, in turn driving up its price.

Alternatively, with only four data points available, it’s possible that these events are merely random variables, and the token unlock may have no direct correlation with DYDX’s price. The analysis of OP’s token unlock and its price movement yielded similar observations.

DYDX Price Loses Channel Support

The DYDX price has increased inside an ascending parallel channel pattern since July 2022. During this period, the price action validated both the resistance and support trend lines of the pattern numerous times.

After the final rejection on March 4 (red icon), DYDX began a downward movement and broke down from the channel in April. At the time, the channel had existed for 630 days.

Price Breakdown
DYDX/USDT Weekly Chart | Credit: TradingView

The breakdown is important both because the channel was in place for a long time and because such channels usually contain corrective movements. So, it indicates the upward movement was corrective and the trend is bearish.

The MACD and RSI both support this possibility. The indicators are moving downward, the RSI is below 50 and the MACD has made a bearish cross (red circle).

A look at a lower time frame is needed to determine where the DYDX price can find temporary support.

DYDX Price Prediction: Where Will the Price Bounce?

The daily time frame wave count shows that DYDX has fallen in a five-wave downward movement since the start of March. If the count is accurate, DYDX is in wave three of this decrease, which is often the sharpest. The sub-wave count is in black.

DYDX Price Wave Count Drop
DYDX/USDT Daily Chart | Credit: TradingView

Giving wave three 1.61 times the length of wave one leads to a low of $1.20. This could lead to a temporary bounce, starting wave four. Then, the fifth and final wave can mark the end of the correction.

The proposed count will likely create a bullish divergence in the daily RSI (green), which could catalyze the ensuing bounce.

DYDX Could Se More Downside in May

To conclude, the DYDX price action is bearish, and so are the wave count and indicator readings. Furthermore, the 33 million token unlock could add more selling pressure, though an analysis of past events shows no correlation to the price movement.

More downside is probable unless DYDX reclaims the support trend line of its channel.

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