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- Uniswap recorded a 70% price boom but is now in correction mode.
- With Uniswap updating its governance system, it has a unique growth potential.
Over the weekend, Decentralized exchange Uniswap’s (UNI) holders experienced a wild ride as the native token soared by over 70%, from $7.15 to $12.77, following a proposal to overhaul the protocol’s governance system.
However, this jubilation was short-lived as the decentralized exchange token swiftly corrected, settling at $10.65 as of the time of writing. Trading volume has also witnessed a substantial decline of 54.9% to $433 million over the past 24 hours, with Uniswap’s market capitalization standing at $6.3 billion.
Uniswap’s Meteoric Rise
Despite the correction, the token reached a 2-year high, with its monthly gains soaring to 85.6%. As the dust settles, the focus now shifts to whether UNI will maintain its momentum and reach the $15 level.
Notably, Uniswap’s price correction coincided with an increase in exchange supply, indicating that some holders capitalized on gains by liquidating their tokens. However, there was a silver lining as UNI whales continued to accumulate, signaling confidence in future upside potential.
The price surge also spurred a threefold increase in Open Interest (OI) in UNI’s derivatives market, reaching $209 million, the highest level since May 2021. Nevertheless, the recent pullback altered sentiment, with the number of bearish short positions for UNI surpassing bullish longs, as observed in the Longs/Shorts Ratio chart.
Amidst the speculations, intriguing insights were provided by the on-chain data tracker Lookonchain. It highlighted the influence of a16z, a venture capital firm, and community member, which holds 64 million UNI tokens, constituting 6.4% of the total supply.
The price of $UNI skyrocketed from $7.15 to $12.77(+79%) due to #Uniswap's latest proposal.
Note that #a16z holds 64M $UNI($720M, 6.4% of the total supply), which has a decisive influence on the vote because 4% of the $UNI supply voting 'yes' can reach quorum.
a16z received 64M… pic.twitter.com/untuq2H1dq
— Lookonchain (@lookonchain) February 24, 2024
This substantial holding gives a16z decisive power in governance votes, as 4% of the UNI supply voting ‘yes’ can reach quorum. Furthermore, the firm distributed these tokens across 31 wallets, potentially shaping the outcome of governance decisions.
Will UNI Surge to $15?
While predicting short-term price movements in the crypto space is inherently challenging, several factors suggest that UNI may indeed have the potential to attain this milestone.
The proposed governance overhaul, spearheaded by Uniswap Foundation’s governance lead, Erin Koen, aims to incentivize long-term token holders by rewarding those who stake and delegate their UNI tokens. The proposed reduction in fees is poised to make Uniswap more attractive to traders and liquidity providers. This could lead to increased trading volume and liquidity on the platform, driving up demand for UNI tokens as users seek to participate in governance and stake their assets for rewards.
A snapshot vote on the proposed governance upgrade is scheduled for March 1, 2024, followed by an on-chain vote on March 8. If approved, the overhaul would enable the permissionless and programmatic collection of protocol fees, distributing them pro-rata to staked UNI token holders.
Furthermore, the forthcoming Uniswap Version 4 upgrade, scheduled for Q3 2024, promises to reduce costs and increase efficiency, further solidifying Uniswap’s position as a leading decentralized trading protocol.
Whether UNI reaches the $15 mark in the near term remains to be seen, however, UNI’s prospects remain promising, fueled by innovation, decentralization, and a vibrant community driving the platform forward.