DYdX is a margin trading platform where you can borrow cryptocurrency. It allows you to make predictions about the future price of cryptocurrencies. Typically, these features are only available in centralized exchanges like FTX. DYdX is unique in that it allows for the decentralization of access to margin trading.
What is dYdX?
dYdX is a governance coin, allowing holders to vote on proposals. It operates on the Ethereum blockchain. Because of this, the protocol is accessible to anyone looking to add or build to it. The main purpose of the exchange and token is to allow users the access to margin.
Margin is essentially a loan used to buy a form of security. It is traditionally used to buy stocks and exchange-traded funds (ETFs), but dYdX uses it to provide margin for cryptocurrency. The platform offers extremely high leverage, meaning you can get large loans for a minimal down payment as collateral.
The loans for margin are provided through liquidity pools. Owners of the token can stake their position, meaning they cannot sell it. Although they give up the right to sell, they earn interest for their service. As of October, these interest rates are very high, reaching upwards of 20% annual percentage yield (APY). This is because of the volatility of the cryptocurrency market and the large risk holders of the token take when lending their position to borrowers. The project’s main goal is to enhance the usability and complexity of the decentralized finance (DeFi) sphere.
Brief History of dYdX
dYdX was founded in 2017 by Antonio Juliano. Juliano is a former Coinbase and Uber Technologies Inc. (NYSE: UBER) engineer and Princeton University alum. The protocol has seen several changes in mechanisms over the years, going from a margin token system to a more decentralized approach. dYdX has many large investors, including Coinbase, which invested $1 million into its liquidity pool. It also secured a $10 million series A investment in 2020 and collaborated with tech company StarkWare Industries Ltd. to improve speeds and processing power of the network. In late September, the coin hit an all time high of more than $27 and is currently hovering around $23.
How to Buy dYdX.
Now that you understand the basics of dYdX’s platform, you may be interested in learning how to buy dydx token. Fortunately, doing so is fairly easy and only requires a few short steps.
- Open an online account.
The first step in purchasing dYdX is to open an account on a crypto exchange. This simple step usually requires only an email or phone number. Because dYdX is a fairly new technology, not many centralized exchanges or wallets support the token. However, it is offered on a few exchanges, such as Crypto.com and FTX. If the hype surrounding the project increases, you can expect it to be listed on more exchanges.
- Buy a wallet (optional).
Wallets differ from exchanges in that they let you hold custody of your digital assets, adding a level of security exchanges don't provide. You can choose from multiple forms of virtual wallets. While having a wallet is not a necessity to purchase dYdX, it's a good idea to use one to protect your cryptocurrency from online hackers.
- Make your purchase.
On Crypto.com’s DeFi wallet feature, you use the search feature to locate ETH. Once you have located ETH and have a balance, you click the swap button and enter the amount of dYdX you would like to purchase. After this, dYdX is stored on your Crypto.com DeFi wallet. This process is essentially identical if you choose to use FTX instead of Crypto.com. You can also send it to a hardware wallet, such as Ledger, if you wish.
Best Cryptocurrency Wallets for dYdX
Now that you know hot to buy dydx you need to learn how to store it safely. Here are a few of the best cryptocurrency wallets on the market right now:
Best Hardware Wallet: Ledger
Ledger is a hardware wallet that is extremely easy to use and supports the sending and receiving of Ethereum (ETH), which you will need later on. Once you have purchased a Ledger hardware wallet, you simply download its software onto your computer and create an account. You’ll be assigned a wallet address (typically a long string of letters and numbers), and then you can send and receive Ethereum through the wallet. Hardware wallets offer an extra level of security as opposed to software wallets, but they cost money while software wallets are typically free.
Best Software Wallet: Crypto.com DeFi Wallet
The Crypto.com DeFi wallet offers the dYdX token and is easy to use. Make sure you are using the DeFi wallet app, as it is not available on the normal exchange. Opening an account is simple and quick. All you need is an email or phone number and a funding source.
You can also send funds from another exchange like Coinbase to your Crypto.com DeFi wallet. To do this, you locate Ethereum on your Coinbase account and hit the send option. From there, you enter the wallet address associated with your Crypto.com account. Hit send, and the funds should be in your Crypto.com account. Either way, once you have the funds in your exchange account, you are well on your way to purchasing dYdX.
Keep an eye out for new investors in the project. This allows the platform to have a greater reach and can greatly increase the price.
Trade, Sell or Convert Your dYdX
To sell or convert your dYdX, navigate back to the token’s profile and select the trade or convert option. On Crypto.com, you convert the token to Tether (USDT) or Crypto.com Coin (CRO). However, the full list of convertible currencies can be found on coinmarketcap.com. While you cannot directly sell your dYdX tokens for fiat (U.S. dollars) currency, you can convert them to a stable coin, such as Tether. You can then sell your stable coin for fiat and deposit it back into a bank account. Selling a cryptocurrency usually involves fees whereas converting to another coin does not.
Current Crypto Prices
The cryptocurrency market is still up from the lows it reached in its recent crash but still far below all-time highs. Ethereum may see an even greater resurgence once the highly anticipated Merge update goes live soon. Prices change every day, and nobody knows where prices will go.
While some say crypto may be leaving the bear market, others view the recovery as a minor excursion from a larger correction. Either way, the increased volatility is defining the current market. Volatility provides opportunities to profit but can also lead to severe losses. Make trades with a calculated approach to mitigate risk.
Is dYdX a Good Investment?
dYdX is leading the DeFi movement, allowing traders to seize opportunities they see in the market. The company has a strong development team and institutional investors to back it up. However, the protocol is much riskier than traditional margin as crypto is far more volatile. This risk means it could begin to lose money in a bear market. The next bear market will be telling for the future of dYdX.
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