The total crypto market cap is now on the brink of the $1 trillion mark after Bitcoin price fell to a 3-month low below $25,000 on Thursday.
The latest slump came after the Federal Reserve announced that it had paused interest rate hikes in June. The halt came after ten consecutive rate hikes since March 2022 to keep the key rates unchanged at 5-5.25%, giving the central bank time “to assess additional information and its implications for monetary policy.”
Fed Chairman Jerome Powell-led Federal Open Market Committee (FOMC) voted Wednesday to pause its aggressive campaign despite “elevated” inflation. However, it has been indicated that another sharp increase could be needed before year-end.
And with that, crypto assets took a dive. Since then, Bitcoin has broken out of its range and is on a downtrend. Ether, too, has been affected, as it has fallen 6% to now trade around $1,637.
Meanwhile, the Crypto Fear and Greed Index is giving a reading of 41, falling to its lowest level since the mid-March market slump. Crypto analytics firm Santiment also noted that trader sentiment is “officially at its most negative level since Covid crashed markets in March 2020.”
Amidst this carnage, UNI is the only prominent token in the top 100 crypto assets by market cap, which has been in the green in the past 24 hours.
Unlike the majority of the crypto market, UNI's price jumped 2.4% to trade at $4.42, as of writing, while managing $158 million in 24-hour volume. UNI is also up by 7.2% and 9.6% against BTC and ETH, respectively.
Last weekend, the UNI price fell by 19.35% to $3.75, but it has been trending upward since then. The price of UNI surged 23.2% to $4.62 late on Wednesday before it started to lose momentum as Thursday progressed.
Much like how UNI is defying the trend right now, the token has been moving in the opposite direction in 2023 up until now, but unlike this time, it has been on a downward slide. The $3.3 billion market cap cryptocurrency is in the red by 16% year-to-date (YTD).
Still, UNI is the only DeFi token with a 7-day negative price performance of just 3.5%, while the broad DeFi market is recording double-digit losses. The total DeFi market cap is currently at $41.169 billion, far off its $172 billion peak in Nov. 2021.
Uniswap Gains Traction, UNI Attracts Attention
UNI is the native token of the decentralized exchange (DEX) Uniswap, which was created in Nov. 2018 by Hayden Adams, who is the CEO of Uniswap Labs. On-chain governance is made possible for UNI token holders as they contribute to future protocol upgrades and set the DEX token list.
Uniswap is a liquidity provider for trading tokens on the wider Ethereum network. The exchange is fully decentralized by using a trading model known as an automated liquidity protocol (AMM) which gives users incentives to provide liquidity for trades to be executed instantly at a known price.
Being the largest DEX, it currently records almost a billion dollars in trading volume. Uniswap V3 has actually processed over $1 trillion in transactions since its inception, as per DeFi Llama.
At the time of its launch, one billion tokens were minted to be distributed over the course of four years. 60% of tokens will be distributed to community members, and the remaining 40% will go to investors, advisers, and team members.
In the subsequent months to UNI's launch in Sept. 2020, the token hit an all-time high (ATH) of $45 during the wider bull market, but since then, it has lost more than 90% of its value. For the past year, the UNI price has been primarily trading between $4 to $7.
Now, Uniswap price's quick recovery after the last week's drawdown makes it a much better-performing cryptocurrency than not just the altcoins but also the majors. The coin is now facing resistance at $5, which coincides with the 50-day Exponential Moving Average (EMA).
The price surge comes amidst the soaring volume on DEXs due to US Securities and Exchange Commission's (SEC) increased scrutiny toward prominent centralized counterparts – Binance and Coinbase.
Between June 4 and June 10, DEX trading volume rose from $1.21 billion to nearly $4 billion, as per DeFiLlama. Meanwhile, CCData noted in its recent report that the market share of these platforms surged for the fourth consecutive month in May, reaching a new high of almost 13%.
However, it's worth noting that the number of daily active users on the Uniswap protocol has fallen by 49.8% over the past month. This reduction in daily active users has been in line with the broad bearish sentiment in the crypto market, resulting in a significant decrease in Uniswap's fees.
In 2023 so far, Uniswap has generated $284.3 million in fees. This makes it the third-largest project in the crypto market, after Ethereum ($1.2 billion) and Tron ($394.3 million) based on daily cumulative fees since the beginning of the year, as per TokenTerminal.
Investors are also supporting the uptrend in UNI price with large wallet holders, those between 100,000 to 1 million UNI tokens, as well as addresses holding 1 million to 10 million UNI, having amassed close to 11 million UNI worth nearly $50 million.
Most recently, Wintermute Trading ramped up its UNI stack, accumulating substantial tokens from various centralized exchanges (CEXs) such as Gate.io, Binance, and Kraken, among others. Wintermute purchased 878,336 UNI tokens this week, according to data from Lookonchain, bringing the total holdings of the crypto-native algorithmic trading to 886,269 UNI, worth about $4 million.
According to data from analyst Kate Young, UNI reserves on CEXs have also surged to record levels suggesting heightened interest and demand for the token. But, at the same time, this could mean a potential upcoming selling event.
Not to mention, the MVRV ratio for UNI, which compares the market value of the token to its realized value, is seeing a significant decline, suggesting that most holders were not profitable. The declining MVRV ratio further indicates that the selling pressure on UNI has fallen.
Uniswap Labs Releases Plan for V4
One of the most prominent reasons for UNI's price surge is Uniswap V4. And for the first time ever, the project is opening its development process to the public while the SEC cracks down on its centralized competitors.
Uniswap Labs, the team behind the DEX, announced its plans for the next iteration of its crypto exchange platform: Uniswap v4. Late last year, the company secured a $165 million Series B, and before that, in 2020, it raised $11 million in a Series A funding round led by the prominent venture capital firm a16z.
This time, the company is inviting community feedback on Uniswap v4 before its public launch in an attempt to separate the DEX from CEXs such as Coinbase (COIN) and Binance, which are currently facing lawsuits from the SEC.
However, the SEC has previously signaled its intention to increase oversight of the DeFi ecosystem as well, and Uniswap itself was the subject of a 2021 SEC probe, according to a Wall Street Journal report. Moreover, crypto assets deemed securities by the SEC in its recent CEX lawsuits can currently be traded on the platform. Despite that, Uniswap continues its development.
The current version of the platform, Uniswap v3, made its debut in 2021 and has since expanded beyond Ethereum to multiple networks. Now with the v4 upgrade, the idea is to expand on the DEX's coin-swapping capabilities by introducing custom liquidity pools and “hooks.”
In a blog post published on Tuesday, Adams described hooks as “plugins to customize how pools, swaps, fees, and LP positions interact.” According to him, this new functionality could pave the way for things like on-chain limit orders, automatic deposits to lending protocols, automated compounding of liquidity provider (LP) rewards, and dynamic fees.
“Hooks” will also allow for time-weighted average market makers (TWAMM), which spread out buy orders over a long period of time.
These features are available on more traditional exchange platforms but are harder to implement in a blockchain setting with no intermediaries or centralized order books present.
The developer further plans to introduce performance improvements and fee reductions to Uniswap v4's draft code. On Uniswap, anyone can create pools to facilitate token swaps, but under the v4 proposal, the network gas fees required to list new pools will be cut down by 99%.
To reduce fees, the new version will hold all liquidity pools in a single contract, decreasing the transaction costs to execute trades across multiple pools. Also, v4 will introduce “flash accounting” to execute internal transfers using net balances rather than moving assets with each swap. It may also support trades using native ETH rather than its wrapped ERC-20 counterpart to reduce more fees.
Uniswap expects further gas savings when EIP-1153 goes live with Ethereum's next major upgrade, Dencun. However, according to Adams, receiving community feedback, making improvements and optimizations, and then enabling people to build on top of it could delay the new iteration's availability for public use by several months.
The new release from Uniswap Labs comes less than three months after the two-year Business Source License (BSL) for Uniswap v3 expired on April 1, allowing anyone to fork and reproduce the exchange's code in a commercial setting.
The new iteration, v4, will be subject to a four-year BSL though exemptions can be made as Uniswap governance did in March this year by authorizing the code's deployment of v3 on Avalanche and BNB Chain.
Meanwhile, in an interview with a crypto media publication, Uniswap Labs engineer Sara Reynolds said v4 would allow AMM innovation to evolve more rapidly than before. According to her, “hooks” will bring “limitless” innovation in terms of customizability.
“The possibilities are pretty endless,” said Reynolds, adding that the “development of v4 is brought into the open so that the community “can take it anywhere.”