Tuesday Coin Deep Dive: Can Uniswap Find Some Signs of Life?

For our Tuesday column, we analyzed one coin specifically to see how it has performed thus far and how it will develop price-wise in the future. Today we dive into Uniswap (UNI), the biggest decentralized finance (DeFi) protocol in terms of total value locked (TVL) and market capitalization. We will discuss Uniswap’s struggles in the price charts, as well as how Uniswap could grow out of the short-term decline.

What is Uniswap?

Uniswap is a decentralized finance protocol that “empowers developers, liquidity providers and traders to participate in a financial marketplace that is open and accessible to all,” according to its official website. It is developed to create liquidity and for trading ERC-20 tokens on Ethereum. It also intends to eliminate intermediaries and any forms of “rent extraction,” such as spreads, commission fees or transaction fees (apart from gas fees). You can trade virtually any cryptocurrency from one to another on the website with a single click if there is available liquidity pool behind the token that supports the swap.

Why is Uniswap Struggling?

While Uniswap as a protocol continues to be one of the go-to’ s when it comes to swapping tokens and being a liquidity provider to earn constant fees, multiple competitors have surfaced recently, the most notable being SushiSwap, which was a direct fork from Uniswap, and PancakeSwap. With other protocols offering almost identical services, and with better incentives in terms of staking and swapping, Uniswap is struggling to differentiate itself. Being a market leader in the space of DeFi certainly still helps its case, as its TVL has risen to over $4 billion dollars over the entire protocol. However, it must figure out what new features it could add to the protocol before the price of UNI continues to tumble.

UNI Price History and Future Outlook

UNI’s current price is $21.965, the lowest since September 26^th, 2021. It is down more than 17% over the past week and 8.5% over the last 24 hours. Some of this coincides with the fact that the entire cryptocurrency market is down after multiple news of negative sentiment. First, Twitter CFO says the company will not be investing corporate money into crypto currently, stating that such proposal “doesn’t make sense right now.”

Second, a former Chinese Communist Party Official was expelled from the party, in part, for allowing cryptocurrency mining. Coupled with the fact that the U.S. S.E.C. rejected a proposal for a spot Bitcoin exchange-traded fund (ETF), it’s easy to see why major coins, such as BTC and ETH, along with the rest of the cryptocurrency space, is seeing a decline in prices today. However, we should also note that UNI’s drop in prices is even more significant than its peers, hinting at additional wavering in investors’ confidence in UNI’s ability to continue to grow in the future.

UNI Price Chart since September 26^th (1-day interval)

Recommendation

We do not have a leaning towards a buy or sell regarding UNI. However, investors should note that there are other better-performing cryptocurrencies at the moment, compared to UNI, and that UNI is facing rising competition while struggling to differentiate itself, apart from being a first-mover in the DeFi space. It is also possible that this decline in prices is purely due to the inherent volatility of the market, and that this is a price point worth investors to buy in undervalued UNI contracts. As usual, invest with caution and be well-informed before making investment decisions.