Despite Uniswap Outpacing Coinbase, What Will Save Its UNI Token?

DeFi’s most popular DEX may be beating centralized competition, but its native token is becoming fodder for the bears.

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Key Takeaways

  • The total liquidity on Uniswap increased to a new all-time of $2.47 billion, but the daily trading volume has dropped below $300 million. 
  • UNI sets sight on new lows following a break below technical support levels.  
  • A Uniswap-based vault on yEarn vault could increase the demand for UNI token. 

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After a 60% drop from its peak, the UNI token price is facing continued pain despite the success of Uniswap. A recent proposal from the yEarn community may, however, save the falling token.  

Decreasing Volume and Fees on Uniswap 

In September, Uniswap’s trading volume was greater than even Coinbase, taking the DEX to the fourth position in the global exchange rankings. 

Nevertheless, much of this rise is attributed to the UNI token launch and the subsequent rush to yield farm the token.  

Uniswap DEX Stats
Uniswap DEX stats. Source:

While the protocol’s liquidity is still rising, the daily volume is forming lower highs since its peak on Sept. 17. And as daily volume drops, so too do liquidity providers’ (LPs) returns on trading fees. LPs earning UNI tokens aren’t safe from the drop either. 

UNI has broken below the support of its descending triangle at $3.65, indicating further losses for token holders moving ahead. 

Lower highs and horizontal support characterize a descending triangle pattern. The distance from the base to the top of the triangle is $3.54.

UNI/USD 4-Hour Chart on Binance
UNI/USD 4-Hour Chart on Binance. Source: TradingView

Currently, the 38.2% Fibonacci retracement level for UNI token from the bottom to the peak is $3.42. If this support breaks, the price will look for support at $2.1. 

On the upside, the resistance from the 50% and 61.2% Fibonacci retracement levels are $4.42 and $5.42, respectively. 

yEarn Vault Adds More Pain

Franklin, an independent programmer, has proposed to add a Uniswap-based vault to the yEarn Finance platform. 

The design will add liquidity to incentivized Uniswap pools, which enable yield farming of UNI tokens. Users can currently earn UNI tokens by mining four pools: ETH-USDC, ETH-USDT, ETH-DAI, and ETH-WBTC. 

For example, the vaults will convert UNI to both ETH-USDC, add it to the respective Uniswap pool, mine UNI from it, sell the UNI harvest for more ETH-USDC, and repeat.

Out of 150 voters, 127 of them have voted for the proposal, at press time. Once passed, the strategy could still any remaining demand for the UNI token as users pour capital into the new strategy. By constantly selling UNI for more ETH-USDC, sell pressure for Uniswap’s token will continue to suppress prices.

All that being said, Uniswaps’ daily trading volume is still outpacing Coinbase by roughly $116 million, according to CoinGecko. Unfortunately, much of this may only be due to the incentivized yield farming scheme. 

The real test for Uniswap will come on Nov.17 when these incentives fall away.

Editor’s note: This article has been updated to show that the UNI strategy on yEarn is bearish for the token, not bullish. 

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