Is the SEC enquiry a red flag for Uniswap investors?

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The XRP v. US Securities and Exchange Commission case has been ongoing for about 9 months. With new developments occuring on a regular basis, the case shows no signs of being resolved anytime soon. Uniswap, the world’s largest decentralised exchange, and its developers are now on the SEC’s radar.

As stated in a previous report, the SEC is investigating how investors use Uniswap, how it is marketed, and its operational procedures. For the time being, the enquiry is reported to be in its early stages and is unlikely to result in official prosecution anytime soon. However, when the aforementioned news broke, it had a significant negative influence on the token.

Uniswap’s price has risen by over 20% in the three days between August 30 and September 1. However, the DeFi token has lost over 11% of its value since then. At the time of writing, UNI’s worth was one dollar shy of the $30 barrier.

So, amidst this regulatory uncertainty that is lingering, do UNI traders need to change their strategies or would it be better to stick to their original targets?

Assessing the current state

Well, the state of UNI’s on-chain metrics portrayed quite a few emerging tendencies at the time of writing. For starters, Glassnode’s data with respect to the number of active addresses depicted a riveting trend.

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This statistic had reached a one-month low [1708] near the end of August. However, it has risen dramatically in the previous several days and is now clearly at 2573 at the time of writing.

So, does this unexpected increase in the number of active addresses imply that dormant users have been cashing out after learning of the aforementioned SEC-related development? To answer the question, it is necessary to take a temperature reading and determine whether or not the UNI market has recently experienced severe selling pressure.

Interestingly, at the time of writing, the exchange net flow remained remained negative [-412k]. The same essentially indicated the emergence of buying interest, and highlighted that UNI tokens were being moved from exchange wallets to private wallets and cold storage.

Further, as per data from IntoTheBlock, buy orders have been exceeding the number of sell orders lately. For instance, over the past 12 hours, more than 200k additional UNI tokens have been bought.

Furthermore, the majority of traders remained optimistic about the token’s short-term prospects. For example, the funding rate on all major exchanges has been positive in general. At the time of writing, Binance, Phemex, and OKEx all had values of 0.08 percent, 0.15 percent, and 0.07 percent, respectively.

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The current levels imply that long traders were funding or paying short traders, which is a positive indicator for UNI’s price.

Source: IntoTheBlock

Furthermore, there was little movement in the perpetual swaps Open Interest. As can be seen in the figure above, they’ve recently been cycling far above $420 million. This means that new money is flowing into UNI’s market at roughly the same rate as previously.

Source: DeFiPulse

The total value locked on the Uniswap protocol has been increasing as well. Surprisingly, it was at a three-month high [$7.2 billion] at the time of writing. In general, this indicates that the UNI market’s overall health has recently improved.

Aside from the initial setback, the UNI market has successfully returned to normalcy. Given the relatively stable position of most metrics, short-term traders can continue to their typical trading tactics with little concern at this time.

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