Thanks to these factors, the future looks bright for UNI

Uniswap is one of the most famous names in the DeFi space. It has a dual role, both as a cryptocurrency and as a decentralized exchange (DEX). Uniswap works on the Ethereum blockchain and allows anyone to exchange ERC20 tokens. Over time, the UNI token has also experienced many ups and downs on the price chart.

UNI 4-hour price table | Source: Tradingview

So far, however, things have taken an interesting turn. Therefore, this article will point it out and analyze the current state of the two above-mentioned aspects of Uniswap.

Decentralized exchange

The main difference between Uniswap and other DEXs is that it uses a “constant product marketing” model as its pricing mechanism. Hence, any token can be added to Uniswap by funding it with the equivalent of ETH and the underlying ERC20 token that is being traded.

Uniswap was launched in November 2018, but Uniswap V2 and V3 were released relatively later, in 2020 and 2021, respectively. The releases resulted in a number of important upgrades and fueled the growth of the platform. In fact, Uniswap is currently one of the largest DEXs in terms of trading volume.

For most of December, Uniswap V3’s trading volume so far has hovered between $ 2.5 billion and $ 5 billion, which is astonishing compared to just $ 900 million in mid-September.

Trading volume | The source: Coin Gecko

In addition, DEXs typically have no liquidity issues. However, the focus of Uniswap V3 so far has been on providing the infrastructure and tools to increase the liquidity of the market and make it more competitive.

Liquidity providers are quite active on V3. Multiple limit order options and customizable trading fees encourage them to create new markets for illiquid trading pairs.

Centralized liquidity is clearly the future of market makers (AMMs) and the success of Uniswap V3 so far proves it. In fact, V3 is currently ahead of other DEXs like SushiSwap, Balancer and is currently the most capital efficient DEX.

Source: Messari crypto theses

Token UNI

Holder UNI remains optimistic about the future of the token, with the accumulation trend accelerating rapidly and most indices being flat.

In fact, other bullish signs were also emerging at the time of analysis. Looking at the curve of FTX derivatives, the market has almost entered the backwardation phase in the period from December 4th to 5th. However, it later came back to delay the purchase (contango).

Hedging is a situation where the futures contract price of an asset is higher than the spot price. This also often happens when the price of the Underlying is expected to rise over time. So as long as the curve doesn’t slide back into the hedging zone, derivatives traders have the potential to change things for Uniswap.

The plant’s turnover rate has also remained above zero so far. This basically means that the uniswap market is not lacking in momentum. On the last day, UNI’s price was up almost 1% and that’s a good sign after falling continuously from 8/12 to 10/12.

The source: IntoTheBlock

Therefore, based on the above analysis, it is not wrong to assume that Uniswap has a lot of potential for future development. Over time, it will gain an even larger share of the DEX market. The price of the UNI token also benefits directly from this.

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