The decentralized exchange, Uniswap has reached one of the critical pieces in the DeFi sector. It is because the DEX is benefiting from the first-mover advantage after it became the go-to exchange for new crypto projects and traders in 2020.
At the end of 2020, nearly 400 UNI tokens were distributed to all the wallet addresses that provided liquidity on the platform. At the peak, the impromptu airdrop was worth $3,500. By the end of October 2020, the DeFi market was sold sharply, and the UNI price dropped below $4.00 make for weeks.
The year 2021 marked the lucky one as the UNI token has gained 335% and reached a new all-time high at $15.35 on Jan. 27.
The causes for this price increase are an increase in daily volume transacted on the platform, the rise in the platform’s total value locked, and the roll-out of governance features as the Uniswap v3 launch approaches.
The Total Value Locked Rises
Analyzing the total value locked (TVL) of a DeFi protocol is one of the primary metrics used to understand the legitimacy and its involvement in the community. When the TVL increases, it indicates that the users trust the platform enough to deposit their funds and earn rewards. It also means that the liquidity pools are more competitive when compared to other exchanges in the sector.
Uniswap demonstrated an all-time high TVL of $3.16 billion on Jan. 24. It also boosted an increase in the price of many top cryptocurrencies and DeFi tokens.
Uniswap is now the top DEX in terms of TVL. In terms of lending the platform, it comes forth as Maker (MKR), AAVE, and Compound (COMP) lead in this area.
Uniswap’s trading volume competes with top DEX
Another reason for the UNI price surge is its sharp rise in trading volume on the exchange. As per the data, Uniswap’s daily volume is above $400 million since the beginning of 2021. This metric reached its new high of $1.3 billion on Jan 11. This increase in volume has place Uniswap in competition with top DEX.
The Uniswap transactions are so tremendous that it can surpass its direct competitors and the data from Dune Analytics depicts that in early 2019, Kyber Network and IDEX were Uniswap’s main competitors.
Since then the number of DEXs has increased. By March 2020, Uniswap was the preferred choice for traders and it remained dominant in 2021 as well.
The excitement around the V3 rollout bolsters UNI price
Many airdrop recipients sold their tokens immediately after receiving them. But, those who held the tokens now have the ability to receive extra benefits in addition to governance features.
Currently, the Uniswap Treasury has nearly $500 million in it. Recently, the Uniswap founder, Hayden Adams asked the community “what are some of the most impactful ways governance can allocate this UNI?”.
The list of delegates for Uniswap is consistently growing and the demand for UNI tokens will increase if more UNI is locked on the platform for the purpose of governance. The invention of the upcoming Uniswap v3.0 continues to build attention and in addition to this, new governance features, solutions for the high gas fees, and improvements to the impermanent loss structure are also expected.