Why do bulls continue to hold all of the aces in the Ethereum market?

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As ETH gained a foothold above $3,500, the appearance of short-bodied candlesticks signalling a period of indecision among buyers. The world’s largest altcoin was now waiting for a catalyst to break through its consolidation phase and push on to $4,000.

Bullish RSI and DMI readings lent weight to a successful breakout, but ETH may soon lose its advantage due to some unfavourable developments. At the time of writing, ETH was trading at $3,605, down 0.7 percent from yesterday’s close.

After finding their particular niches, decentralized exchanges have sort-of started treading on their own self-carved paths. Uniswap and SushiSwap – two of the biggest names in the DeFi space, have branched out in different directions. Uniswap, for instance, has predominantly started focussing on spot trading on Ethereum and L2s.

SushiSwap, on the other hand, has been drifting more towards other differentiated DeFi products. In effect, their user bases have become even more streamlined and differentiated.

The on-chain battle

During the flash crash period in May this year, DeFi usage massively plunged. Typically, that was the point in time from when the difference became even more stark and prominently visible.

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During the aforementioned period, Sushi’s weekly volumes fell by 85% while Uniswap’s fell by merely 68%, underlining the former’s underperformance.

Nonetheless, during the same May-July downtrend period, the number of users and transactions decreased by single to double digits. The fact that the high transaction count did not translate into trading volumes suggests that Sushi users were yield farming and consistently selling tokens that they earned rather than trading.

As a result, it wouldn’t be incorrect to say that Sushi’s user base is primarily made up of DeFi participants, with a relatively small retail user base.

Source: Dune Analytics

Surprisingly, during the subsequent recovery period, Sushi’s volumes increased by nearly 170 percent from its local low, while Uniswap’s increased by only 97 percent.

When this is combined with the comparative average trading size per user and the number of unique weekly traders, it is clear that SusipSwap has outperformed Uniswap in recent months.

Sushi’s additional edge

Additional DeFi products offer novel ways to interact with Sushi’s platform and that, quite clearly, gives it an extra edge over Uniswap. In all, they’ve been able to garner supplementary revenue and increase the influx of new participants into the ecosystem.

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The recent credits for the same go to two key factors – the Bit DAO sale [managed to generate over $250 million in volumes on the platform], and Shoyu’s [Sushi’s native NFT platform] product cross-selling service.

Simply put, cross-selling encourages customers to buy related or complementary items. As a result, Sushiswap has been able to grow its revenue without incurring any additional, unwelcome costs.

Despite the differences in user base and product, the token prices of SUSHI and UNI have a fairly high correlation and have been making highs and lows together. On the price chart, they’ve essentially been mirroring each other’s movements.

As a result, even though their paths have diverged for the time being, it will take time for both ecosystems to mature and thrive independently.

Source: TradingView

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