Traders raised their bids for the decentralized exchange token, believing it would benefit from China's decision to classify all crypto transactions as "illegal."
Decentralized exchange dYdX's native token DYDX surged by nearly 80% this week as traders assessed its potential against China's recent ban on crypto transactions.
The DYDX price hit a new high of $26.50 on the FTX exchange after trading at around $13 a week ago. The China ban was an apparent boost for the dYdX decentralized exchange (DEX) that offers perpetuals, margin and spot trading, as well as lending and borrowing services to its users.
Holding DYDX gives owners the right to propose and vote on changes to dYdX's layer 2 protocol. DYDX stakers receive rewards by depositing to the DEX's related liquidity staking pools. Users also benefit by receiving a discount on trading fees that are based on the size of their DYDX reserves.
DYDX distributed—or airdropped—DYDX tokens among its users based on their activity on its DEX platform. The lowest tier, which had traded as minimal an amount as $1 on the exchange, received 310 DYDX. Meanwhile, those who traded more than a million-dollar worth of digital assets on dYdX received 9,529 tokens.
As a result, many traders who held onto their free DYDX tokens earned more than $245,000 in profits as the cryptocurrency reached its record high of $26.50 Wednesday. One of the traders—who received DYDX by having more than one account on dYdX—made about $900,000.
My free $DYDX airdrop is worth $900,000. Good morning.
— Carter (@moneywithcarter) September 23, 2021
While the price per token corrected by more than 10% later, its daily returns were still positive, showing traders' intent to speculate more on DYDX's bullish bias in the sessions ahead.
China FUD attracts new users
One of the primary reasons behind their bullish bias was China. The People's Bank of China released a notification on Sept. 24 that banned all kinds of crypto-related transactions. In response, crypto assets fell, including top assets Bitcoin (BTC) and Ether (ETH).
But among the worst-hit cryptocurrencies were Huobi Token (HT) and OKB, natives tokens of China-focused centralized exchanges, Huobi and OKEx, respectively. While the HT price lost 52.64% two days after the PBoC's announcement, the OKB price dropped by as much as 43.87% in the same period.
The tokens fell as Huobi and OKEx closed their over-the-counter operations in China and stopped accepting Chinese users on their platform.
On the other hand, dYdX volumes boomed to record highs, raising anticipations that China-based traders are moving their activities to exchanges that have no central intermediaries and that do not practice Know-Your-Customer, or KYC, procedures.
As of Monday, dYdX facilitated over $4.3 billion worth of trades, compared to Coinbase’s $3.7 billion.
Technical outlook
DYDX price has the potential for more upside, based on a supportive technical indicator.
Dubbed as Bull Flag, the bullish continuation pattern emerges when an asset consolidates lower inside a descending channel following a strong upside move. In doing so, it attempts to break bullish out of the downside structure.
Related: DeFi farmers boast about gaming dYdX airdrop as prices surge
When it does, the price tends to rise with length equal to the scale of the previous uptrend. So it appears, DYDX ticks all the boxes when it comes to forming a Bull Flag on its 15-minute chart, as shown below.
As a result, DYDX now now eyes a run-up towards or above $27.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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