Why Uniswap will play a crucial role in the coming months
Uniswap with a near 10% growth in price in the past 24 hours traded rangebound for the last two weeks, before breaking past the current price level. The asset’s trade volume is now up 38% on exchanges and this increased liquidity has increased the volatility as well. The increase in liquidity is not as high as retail traders would expect in most markets. At the $34.41 level, the liquidity of UNI/ETH has dropped nearly 6.5% based on data from uniswap.org.
The mean transaction volume for UNI had dropped however this has not had a negative impact on the price. The drop in transaction volume signals that there is room for further growth in price, as overall trade volume has increased. UNI’s price rally is expected to support ETH’s price. Other events that are expected to have a significant impact on Ethereum’s price are ETH’s Berlin upgrade and drop in supply over the following weeks as more Ethereum is deposited in the 2.0 contract.
UNI and top Defi tokens are playing a key role here, and with increasing popularity and volatility they may have a direct impact on Etheruem’s price on spot exchanges. Uniswap’s layer 2 clone, has already witnessed an increase in liquidity. With rising gas costs, it is a potential scaling solution for Ethereum. Founder Vitalik Buterin has mentioned this previously when gas prices hit an ATH and traders on crypto Twitter asked for a solution.
UNI’s role in this is key, as top Defi tokens like Uniswap have lost popularity, trade volume, and transactions due to rising gas cost. A comeback of these tokens as a scalable layer 2 solutions would lower the transaction cost and offer near-instant settlement making it feasible for most users. With the launch of ETH’s Berlin upgrade and price moving to a range close to Ethereum’s previous ATH, it is clear that layer 2 solutions like Uniswap are likely to make ETH 2.0 useful to retail traders, and in the long run, this is bullish for Ethereum.
The positive impact on Uniswap’s price is evident from the price charts. DeFi tokens like Sushi, Aave, Compound, Maker, and YFI are contributing to Ethereum’s price rally thanks to the steady investment inflow, TVL and interest from institutional investors.