DYDX, the native token of a decentralized exchange (DEX) with the same name, has been on a good run in the past few days. According to CoinGecko data, the cryptocurrency’s price jumped by 10.7% in the past week, reflecting a positive performance after an unfavorable start to August.

However, there has been rising concern that this spurt of bullish momentum may be short-lived. And the upcoming token unlock event is the primary source of this skepticism.

Token unlock events are not a strange phenomenon in the cryptocurrency space, as many blockchain networks and decentralized finance (DeFi) protocols have a portion of their token supply locked – to be released periodically. DYDX is one of those tokens with a locked supply and its next token unlock event is happening on Tuesday, August 29.

In the latest iteration, the decentralized exchange will unlock $13.82 million worth of its native token to be distributed to its community treasury and rewards for liquidity providers and traders, according to data from Token Unlocks.

The token tracking dashboard shows that the DEX will release 6.52 million DYDX tokens, which accounts for 3.76% of the token’s current circulating supply. 

Breaking this figure down, 2.49 million tokens – equivalent to $5.279 million at the current market price  – will be allocated to the community treasury, which funds contributor grants, community initiatives, liquidity mining, and so on.

Meanwhile, the remaining 4.03 DYDX tokens will be distributed between trading rewards (2.88 million tokens worth roughly $6.11 million) and liquidity provider rewards (1.15 million tokens worth an estimated $2.44 million).

This is the second time the DEX will be carrying out an unlock event in August 2023. On August 1, 2023, dYdX executed an identical unlock event, distributing the same amount of tokens to the community treasury, liquidity providers, and traders. 

Upon completion of this forthcoming event, over 25% of the total token supply will be unlocked, while less than 75% of the supply will still be locked.

Given that a considerable chunk of the 6.52 million DYDX tokens will be going to liquidity providers and traders, the chances are that a substantial portion of the tokens will be offloaded in the open market. As such, the DYDX price could suffer due to increased selling pressure.

The signs are not particularly positive from a historical perspective, either. Price action data reveals that the price of DYDX struggled after the identical unlock event on August 1.

The token lost nearly 10% of its value in a few days, reaching $1.91 by August 4. Although the token has witnessed an impressive turnaround, investors could see DYDX fall below the $2 level again if history were to repeat itself.

As of this writing, the DYDX token changes hands for $2.12, reflecting a 1.7% price dip in the last 24 hours. CoinGecko data shows that there has been a 36.2% decline in the token’s daily trading volume, signaling a recent fall in market activity.

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