[DRC] Add ALGO-USD to the dYdX Chain

dYdX Chain
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A proposal was recently listed on Mintscan for an ALGO-USD market. Chaos Labs supports the addition of ALGO-USD to the dYdX Chain and recommends listing under liquidity tier 2. In line with the criteria for introducing a new market, as detailed in the v4 documentation, we present our analysis and the rationale behind our recommendation for ALGO’s listing.

Analysis

ALGO is currently listed for spot trading on exchanges, including Binance, Coinbase, MEXC, Bybit, OKX, KuCoin, Kraken, and Gate, with its launch on June 20, 2019 (CoinGecko). Recent 24-hour Perpetual volumes for ALGO have also recently been north of $89m, showing interest in trading it. With aggregate liquidity of $1.9m within a ±2% range, ALGO’s price stability is deemed robust enough against potential manipulation, qualifying it for listing on the dYdX Chain.

Liquidity Tier Recommendation

ALGO fulfills the requirements for a Long-Tail asset as defined in the dYdX v4 documentation, and, therefore, we suggest categorizing it under liquidity tier 2.

As outlined in the v4 documentation, liquidity tiers specify the margin requirements needed for each market. They should be determined based on the relative market’s spot book depth and the token’s market capitalization.

ALGO aligns the Oracle liquidity requirement at 8 out of 8 Oracle sources. All 8 of these are both robust and queryable sources according to the dYdX listing criteria. Below are the volume and liquidity depth metrics for the proposed ALGO oracle sources:

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Given that it meets the Long-Tail criteria with 8 qualifying oracle sources, but less than $100m average daily spot volume, we suggest listing ALGO at a liquidity tier 2.

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Following our due diligence we also recommend this token for a tier-2 listing. If market-depth on exchanges improve in the near future without too much price volatility, we would be happy to support a tier1 raise. All other factors under our review are already favorable for this.

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I concur with Chaos Labs’ analysis. ALGO-USD appears well-suited for listing on the dYdX Chain.

  • Robust Trading Volumes: The $89m+ in 24-hour Perpetual volumes suggests strong trader interest in ALGO.
  • Oracle Support: With 8 qualifying oracle sources, ALGO exceeds the requirements for dependable price feeds.
  • Liquidity Tier 2 Appropriateness: I agree with classifying ALGO as a Long-Tail asset, making Tier 2 the right choice for its margin implications.

Additional Considerations

  • Correlation: It would be beneficial to assess ALGO’s price correlation against other crypto assets on the dYdX Chain. This analysis could provide insights on potential risk diversification.
  • User Demand: Has there been significant community interest in adding ALGO-USD? Gauging demand can further validate listing the asset.

I support the motion to add ALGO-USD to the dYdX Chain at liquidity tier 2.

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