In this edition of Coin Spotlight, we will be discussing a DeFi project that has caught investors’ interest and witnessed a steady rise in value in a short period. The project is Uniswap, a popular decentralised crypto exchange that facilitates the easy exchange of Ether and ERC-20 tokens.
Its native token, UNI, was launched in September 2020, and in such a short period, the token has grown by almost 20 times in value. The coin started trading around the $1(₹75) level at launch and peaked at $44.97 (₹3,611) in the recent crypto bull run.
Uniswap is a bit different from the crypto projects that we have discussed here so far, and it will be interesting to know about the project, which is at the heart of the DeFi revolution.
Key Token Metrics
- Coin Rank: 18th
- Coin market cap (as of 2nd Dec 2021): $13.94 billion
- Coin market dominance: 0.54%
- Coin economics: Inflationary
- Total coin supply: 1 billion UNI
- Circulating supply: 627.9 million (63% of total supply)
- Consensus mechanism: Proof-of-Concept (PoC)
Technical Analysis: UNI Price Prediction
The daily chart shows that UNI has been in a range-bound movement for the last few months. However, it is now slowly building up strength to break higher.
UNI has found strong support at the $19 (₹1,425) level and has successfully bounced higher on both occasions. It is currently facing resistance at the $22.64 (₹1,698) level, which coincides with the 50 day EMA line. If it successfully breaks above with strength, the following resistance levels are $27.24 (₹2,043) and $31.35 (₹2,351).
Overall, the long term trend looks positive, with buy on dips to the right strategy for UNI.
EMA: Exponential Moving Average
A Brief Overview of Uniswap
Uniswap is currently the largest decentralised exchange (DEX) platform, with total value locked reaching $8.29 billion, an increase of over eight times in the last 12 months.
What is Decentralised Exchange?
Decentralised exchanges or DEX allows the exchange of assets in a P2P fashion and relies on self-executing smart contracts instead of an intermediary organisation to facilitate trading.
Built on top of the Ethereum blockchain, Uniswap’s protocol supports swapping of Ether and all ERC-20 tokens. Unlike centralised crypto exchanges, Uniswap operates on a different scale and structure, making it the most liquid decentralised exchange in the crypto market.
Uniswap uses a unique asset pricing mechanism called the Constant Product Market Maker Model, a variant of Automated Market Maker (AMM).
The Automated Market Maker model eliminates the need for an order book-based trading process, where buy and sell orders need to be matched. Instead, the trade orders are completed against the liquidity locked in smart contracts.
Therefore, in Uniswap, you need to find the liquidity pool instead of finding the trading pair you want to trade in. For example, if you wish to trade ETH/USDT, you need to find the ETH/USDT liquidity pool and swap your assets.
And, anyone can contribute to the liquidity pool by depositing both assets in equal value and earning a liquidity provider fee of 0.3% per trade.
So, if a crypto project needs to list their tokens in the Uniswap platform, they need to deposit equal value of their tokens and ETH to create a liquidity pool to enable trading in their asset.
UNI Coin Economics
Launched in September 20202, the genesis supply of UNI is 1 billion units, whose entire circulation is planned over four years, until 2024.
The primary utility of the UNI token is governance over Uniswap’s protocol and generating funds in the governance’s treasury to undertake the development of the Uniswap protocol. UNI can also be used in liquidity mining pools and other growth-driven initiatives to expand UNI’s reach and utility.
All the UNI coins come pre-mined which are distributed through the following channels:
- 15% through community airdrop
- 2% through liquidity mining
- 43% to governance treasury
- 21.51% to team members and future employees
- 17.80% to investors
- 0.69% to advisors
After four years, when all UNI tokens will become accessible to users, a perpetual inflation rate of 2% will start to improve its adoption rate and discourage passive holding.
Uniswap was founded by Hayden Adams and launched the platform on Nov 2nd 2018. The platform is backed by some of the largest VC fund houses, including Anderseen Horowitz, Paradigm Venture Capital, Union Square Ventures LLC.
Uniswap’s Future Growth Prospect
Uniswap has become a leading DEX platform in a short period, with an average daily trading volume ranging above $2 billion and has already processed trades worth over $650 billion.
Uniswap has rightly positioned itself in the path of explosive growth. Recently, almost 100% of the Uniswap community members voted in favour of the integration on Polygon L2 protocols.
Once the integration is complete, it is expected to drastically reduce the transaction cost and time while helping to expand Uniswap’s user base and improving revenue stream through scalability solutions.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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