With more than 1.5 million users, Uniswap is the leading Ethereum DEX.
While crypto goes mainstream and gains adoptions worldwide, a lot of the hype and interest in it is sustained via trading that occurs on centralized exchanges, like Binance, Bitfinex and Indian ones like Giottus. A centralized exchange oversees and operates a platform where users trade while adhering to necessary KYC norms and other compliance. A lot of new projects who are not yet established do not get to list in such exchanges at the first given the scrutiny and due diligence required. Decentralized exchanges (DEX) enable such projects to launch as well as aligns with the core decentralized philosophy of cryptocurrencies. Naturally, many users also tend to use such exchanges to gain entries into new projects as well as to store funds on their own wallets instead of trusting an exchange to do it for them. Today, we will analyse Uniswap – the decentralized exchange on Ethereum blockchain.
Uniswap was launched in 2018 on the Ethereum blockchain. Its Ethereum base means it is compatible with ERC-20 tokens and all popular wallet systems such as MyEtherWallet.
Uniswap relies on tools called Automated Market Makers (AMM) that allow users to “swap” tokens based on pairs, facilitating trading. The programs encourage users to deposit their tokens into pools, with their pricing for each pair reflecting demand. Tokens that have buy pressure have high prices, encouraging people to pool their liquidity into the market maker.
AMM model explained Source: Coindesk
For example, if ETH is seeing more demand than BTC, the ETH-BTC pool will see its price go up, encouraging users to deposit their ETH to supply. In other words, buyers spend their BTC to gain ETH. This is a simplified explanation of how decentralized exchanges work.
UNI Token: Fundamentals
Uniswap has its native token – UNI, that was launched in September 2020. UNI works as a governance token for the platform. Holders can vote on changes to the Uniswap protocol, policies and even reward developers and the community.
UNI has a supply of 1 billion tokens, with 627 million currently in circulation. UNI with a price point of around $19 per token is a top 20 cryptocurrency as of today.
UNI Token: Technical Analysis
UNI hasn’t quite recovered from the crypto market crash of May 2021, hovering nearly 40% below its all-time high of $44, trading at $25 for most of October and November. In the market dip today on fears of new COVID variant, it further corrected to $19, breaking through a crucial .236 fibonacci resistance level of $20.45 that it had previously overcome.
Source: TradingView, Binance
Having broken through this high time frame support, UNI may consolidate at local supports from key daily levels of $17.6 and $14.1. Failure to hold these should send it back to its May low of $13.
If sentiment turns positive, it will need to flip its $20.45 to support again, which has confluence with its 10-day moving average.
Uniswap: Future Potential
Decentralized exchanges have been exploding in popularity as users continue to grow more aware of crypto. Since they are considered safer and allow swaps for all kinds of token pairs, their advantages have attracted more users. Uniswap has several other advantages – one being that it is open source. So anyone can create their own decentralized exchange based on Uniswap’s code. Token listings are free, encouraging all crypto projects to list themselves on the platform, and in turn boosting growth for Uniswap. As a product, Uniswap is a good offering for a market looking to mature in the future.
Disclaimer: This article was authored by Giottus Cryptocurrency Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.