DYDX price drops 12% after dYdX automatically deleverages profitable traders who are closing positions

dYdX (DYDX) price suffered a double whammy on Wednesday as the market crashed as a Matrixport report recommended that the SEC reject a spot Bitcoin ETF. At the same time, the platform’s system leverage was removed from the SUI-USD market following significant price fluctuations.

dYdX automatically cancels leverage this trader. trader profitable

While the cryptocurrency market attempted to overcome the headwinds of Wednesday’s collapse in Bitcoin prices and the broader market, the dYdX ecosystem also became precarious when the crash resulted in large enough price swings, leading to a systemic deleveraging event in the SUI-USD market.arrive tweet Official.

System deleveraging events occur when large price fluctuations cause multiple accounts to be liquidated at the same time. For the dYdX ecosystem, after DYDX prices fell 30% to a bottom of $2.23, liquidations caused the order book to drain liquidity to close affected accounts.

Therefore, the system starts looking for profitable accounts to close compared to liquidated accounts. This reportedly happened when the SUI price was $0.69.

The Yearn Finance (YFI) ecosystem was also affected. The attacker opened a 5x leveraged YFI-USD long position in more than 100 wallets and purchased spot YFI, pushing the price of Yearn Finance up by more than 200%. They then used the unrealized profits to open additional YFI-USD positions, reaching a peak size of approximately $50 million.

As the market crashed, the price of YFI, similar to DYDX, fell by 30%, making it impossible for the attacker to close the position. In the absence of liquidity, the attacker’s remaining positions were mostly liquidated at a loss.

dYdX has taken steps, including updating risk controls, to prevent the incident from happening again.

dYdX network resumes after event, DYDX price outlook deleted system leverage

After a quick liquidity grab, DYDX price is poised to recover, with the 200-day and 100-day simple moving averages (SMA) at $2.35 and $2.68, respectively, driving buying pressure.

The Relative Strength Index (RSI) and Average Directional Index (ADX) indicators indicate bullish momentum (RSI pointing north) and daily uptrend strength respectively, underscoring the bullish thesis.

Increased buying pressure could help DYDX price flip resistance at $2.75 to support and then use it as a starting point to target the 50-day moving average at $3.11. This move would be a 15% increase from current levels.

Further north, DYDX prices may extend towards late December highs around $3.41. Or in a very optimistic scenario, the price will expand into the supply area between $3.72 and $3.99. A breakout and close above the mid-line $3.86 on the daily time frame would confirm the continuation of the uptrend, and DYDX price is likely to gather sell-side liquidity above this order block.

This very ambitious case would see DYDX price turn a supply barrier into a bullish breakout as it extends to highs of $4.36. The move represents a 60% increase from the current threshold.

price chart DYDX/USDT 1 day | Source: Tradingview

On the other hand, if profit-taking occurs after breaking out of yesterday’s decline, DYDX could turn lower and retest 200-day support. A break below and a close below the $2.35 buyer cluster would invalidate the bullish thesis, setting the stage for a potential southward expansion. In an extreme scenario, DYDX price could drop to a bottom below Wednesday’s low of $2.23.

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According to FXStreet