It's All So Derivative

Key Insights

• dYdX is caught between a rock and a soft place. Its recent token unlock creates an overhang on short-term price, but its transition to a fee-accruing model for tokenholders presents a long-term opportunity.
• The protocol has strong fundamentals being a category winner in a winning category. It has clear catalysts for growth as attention returns to the crypto markets and DEX penetration in the derivatives markets increases.
• The potential returns for DYDX stakers can be calculated by assuming trading volumes and fees. At a 50% staking ratio, stakers would earn an annual yield of 6% if all volume from V3 migrates to V4.
• The protocol’s key risks are fierce competition and execution.
• While incumbents in other sectors like OpenSea have been dethroned over the bear market, dYdX is well-positioned to grow thanks to its recent upgrades.