Short Intro On DEXTools
“What is DEXTools?”
When I am faced with this kind of question, especially when speaking with people who are not in the business, I like to answer it this way: “You have to imagine DEXTools as an eye that analyzes and observes a huge amount of data in real-time, on 94 different blockchains, and reports this data in a way that anyone can understand on its platform.”
DEXTools is thus a platform that aggregates data into a single interface, from which you can monitor and analyze in real time what is happening on 94 blockchains without needing additional tools and knowledge.
On DEXTools, it is possible to analyze and visualize data belonging to the decentralized finance branch, DeFi, with a focus on tokens and related liquidity pools. In conclusion, this data allows users to have all the information they need to trade all the tokens that are not present on the most popular platforms, centralized exchanges (CEXs), such as Binance, Coinbase, and so on.
DEXTools has become the leading data analytics and trading platform for the Decentralized Finance (DeFi) industry and, a portion of its revenue streams is used to buy back and burn $DEXT, the utility token of DEXTools.
Why $DEXT Needs Your Attention
We find DEXTools and its token $DEXT, extremely interesting because it has a diversified set of revenue streams, such as:
- Banners in app (with 20m+ views/month)
- “Social Update” fees, paid by projects to update social info on platform
- Fees from the on-platform multi-dex aggregator, DEXTswap
The first point is used to sustain operations, development, expand the DEXTools ecosystem, and also to perform acquisitions. “Social Update” revenues in $ETH, $BNB, and $SOL are used to cover marketing and expansion activities, while the social updates paid in $DEXT (cheapest option) are instead directly burned.
The aggregator (DEXTswap) revenues instead are fully used to buy back $DEXT from the market and burn it. These two activities create a constant buy pressure, currently in the 1.25M to 1.5M $DEXT per month.
A Strategic Move
DEXTools has made a strategic move to amplify the impact of the buyback and burn mechanism on $DEXT. The team removed ~785 $ETH from the Uniswal V2 pool of $DEXT, leaving only 128 $ETH inside the liquidity pool. This outlines a reduction of about 85% of the liquidity within the pool, in terms of ETH.
Don’t trust, verify: https://etherscan.io/tx/0x7943a480bcd57b447ccfc017c260b2cc771eef9c1cfe545dbbd7fb004225ffc1
By reducing the liquidity in the DEXT/ETH pool, each buy or sell order has a larger price impact (aka token price movement after a buy/sell order), meaning that the effect of the burn mechanism will be significantly increased.
With less ETH available to absorb orders in the pool, even modest buybacks of $DEXT will have a greater impact on pushing up the token’s price due to the larger price movements resulting from lower liquidity.
The Effect
What are the current buyback and burn metrics of $DEXT?
- Last 24 hours: 60k $DEXT or 0.076% of supply (at this rate 27.63% of supply burnt/year)
- Last 7 days: 473.4k $DEXT or 0.598% of supply (at this rate 31.09% of supply burnt/year)
- Last 30 days: 1.56m $DEXT or 1.976% of supply (at this rate 23.71% of supply burnt/year)
Based on the different timeframes, DEXTools is expected to buyback and burn around 20/25% of the supply in 1 year. This is a crazy HIGH burn rate (50/100x times more deflationary than $ETH). We bet that you can’t find another token (apart from $RLB) that uses project revenues to buy back and burn the token at this rate.
1) If 60k $DEXT are bought each day from the market, what is the price impact on $DEXT? This leads to a +2% price impact — each day.
2) If 473.4k $DEXT are bought each week from the market, what is the price impact on $DEXT? This leads to a +30% price impact — each week.
Exposure to $DEXT right now means enjoying a +30% weekly (assuming no sales). But what happens on larger time frames? It is unrealistic to think that there are no buys/sells, how does the effect of the mechanism change as the variables increase?
Simulations
We’ve created a simple model that takes into consideration $DEXT buybacks and market events and allows us to predict $DEXT price in a certain timeframe.
The limitations of this simple model are the following:
- $DEXT price is not 100% dependent on Uniswap liquidity, but also on BSC liquidity and Centralized exchanges. Fair to say though, that according to our analysis, Uniswap is still the main driver of the price.
- If the $DEXT price increases, the amount of $DEXT bought-back likely decreases. Hence for longer periods, it would be more correct to simulate a lower buyback rate or lower the expected results.
The simulations keep these parameters constant.
Number of $DEXT in Uniswap Pool: 727,960
Starting price $DEXT: 0.64$
SCENARIO 1: TODAY’S METRICS
Current buyback (1.55M $DEXT/month), No market pressure, 1 month timeframe.
| Delta Price ETH | Monthly Buyback ($DEXT) | Months | Pressure/Month ($DEXT) | Result | Result % |
| 0 | 1550000 | 1 | 0 | $6.27 | 879% |
If buybacks, market pressure, and Ethereum price don’t change, the $DEXT tokenomics model will allow the token to 10x its value in just 1 month. This simulation only highlights how impactful the buyback and burn mechanism has become due to lower liquidity.
SCENARIO 2: MORE REALISTIC
Current buyback (1.4M $DEXT/month), 1.25m $DEXT sell pressure/month, 1 month timeframe.
| Delta Price ETH | Monthly Buyback ($DEXT) | Months | Pressure/Month ($DEXT) | Result | Result % |
| 0 | 1400000 | 1 | -1250000 | $0.93 | 45% |
Even considering selling pressure from holders, the buy-back and burn system would allow the token to absorb the selling pressure and have high positive returns.
SCENARIO 3: BEARISH
Current buyback (1.55M $DEXT/month), 1.35m $DEXT sell pressure/month, -50% price change ETH, 3 months timeframe.
| Delta Price ETH | Monthly Buyback ($DEXT) | Months | Pressure/Month ($DEXT) | Result | Result % |
| -50% | 1550000 | 3 | -1350000 | $1.06 | 66% |
If we combine selling pressure from holders, and -50% price performance for ETH, we can notice how $DEXT simply does not care, as with this thin liquidity pool, the buy back and burn system would allow the token to increase by 66% over a 3-month timeframe.
In other words, the buyback effect is operating at 10x leverage compared to before, with no downside. Crazy, right?
Conclusion
I guess you now understand why we’re more confident than before about our $DEXT holdings after this strategic move made by the team.
The key word is now “volatility”. If we combine a thin liquidity pool, plus a strong buyback and burn mechanism, there’s only one thing to be sure of: volatility will play a key role.
According to us, it will bring more attention to the token, more traders, and more volume, as the risk/reward has completely changed.
Useful Links:
The Burn Dashboard
Blockchain Army Telegram Channel
