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It’s been a positive few days for UNI, both on the price and on the growth front. Not only did the token see a hike and hit a new ATH on the charts a couple of days ago, but Uniswap, a common decentralised exchange, also saw a lot of hype around it thanks to its inventor, trolling everybody around the V3. Be that as it can, a minor correction shortly after has given rise to an obvious query – is this too sweet to last?
A loaded question like this is often difficult to answer with utter certainty. However, there are a few metrics that may give some guidance in this regard. In truth, this issue was also addressed in the new Insights study by Santiment, with the same focus on a collection of metrics to show that there is no simple solution.
At the most fundamental level, the price of the commodity and the amount of exchange are the best measures of its efficiency. In the case of UNI, though the token built an ATH of more than $34 before it traded about $31 at press time, the said rise was not followed by a comparable boost to its volume of exchange. Simply put, a divergence appeared to take place, one implying that there are fewer customers in space and that “demand is being exhausted.”
This also suggests that, relative to December 2020, the current UNI rally will not be as durable on the charts.
Then there’s the problem of developer activity, with UNI seeing its biggest jump in six months a couple of weeks ago. Here, this is predicted on the face of it. After all, with the V3 written for release sometime soon, the aforementioned metric is bound to hop on the charts. What is perhaps more interesting, though, is that the past two times it has increased, it has been accompanied by a similar price spike.
This was also the case this time, with the valuation of UNI appreciating after the dev operation soared. It was expected to happen, too, with the Fee Switch Mechanism approaching the 15th. It should be noted, however, that it is difficult to determine if this trend will last for a long time, particularly if the release of V3 continues to be withheld.
Furthermore, according to UNI’s MVRV 7D, the token was neither undervalued nor overvalued at press time. A cool down era, Santiment named it, which means that there is a chance for more upside down. Historically, if the token has drifted into the overvalued field, the market has reversed itself, with the crypt consolidated under the local top in question. That may be what’s happening right now too.
Such a pattern can be seen when it comes to whale transactions as well, with price tops usually coinciding with hikes in the same.
What are these observations suggesting? Well, they point out that while more upside might be open for UNI, with a potential new ATH on the charts as well, the trend of its market activity is unlikely to continue for a long time. As Santiment put it, UNI can quickly run out of “speculative juice.”
However, a certain set of metrics just tells a certain tale, which is why it is important to look at even more data sets. Consider this – Uniswap is currently trading at more than 16 times its normal daily volume. According to Daniel Ferraro, IntoTheBlock, if UNI closes the gap on the Coinbase (It is valued at over 38 times its average daily volume),
“it could expect an increase of over 2.2x in price, all else being equal.”This is a very bullish outlook, particularly for decentralised exchange when juxtaposed with common, mainstream, centralised crypto-exchange.
At the end of the day, there was a lot of bullish betting by investors in DEX tokens late. For example, the UNI netflows reached a low of $82 million a few days ago, a finding that more and more investors are withdrawing from centralised markets to “hold their positions and/or deposit them for extra revenue in the DeFi protocols.”
This, coupled with the fact that the distribution of stimulus checks is bound to have an impact on the cryptocurrency market, including its DEX tokens, suggests that UNI might not run out of “speculative juice” just yet.