Wednesday, June 23, 2021
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UniSwap’s Token, Buy Now Or Wait?

Uniswap, DeFi’s most successful and loved decentralized exchange has finally released their governance token (UNI). They are giving the Uniswap community the majority of the tokens which is sending gas prices through the roof once again. The hype is so intense that major centralized exchanges are listing the UNI token to trade as soon as they have enough liquidity. Now this seems like a successful launch in retrospect but how will the token perform after many like it have lost over 75% of their value. Let’s go over the currendct crypto market environment and if it’s set up for UNI’s success.

Too Late To The Party?

Being the most anticipated token to be released Uniswap’s timing could have been better. It seems as the DeFi hype is beginning to cool off with many altcoins finding their price bottoms. A few of these altcoins are direct competitors with the automated market maker we know and love. A few airdrops similar to UNI’s are SUSHI and CRV. These were formed to incentivise liquidity providers for their participation in DeFi protocols. Both tokens have experienced massive dumps in price, as high as 75% loss in value in just two weeks.

SUSHI/USDT 4-hour chart. Source: TradingView

Although Uniswap has a larger community behind it, it’s probable that owners and yield farmers will sell their share to take advantage of the high prices.

CEX’s FOMO

Centralized exchanges (CEX) like Binance and Coinbase Pro have opened their exclusive doors to UNI. CEXs have witnessed the tremendous volume that decentralized finance brings and they want to take some of that DeFi market share. Binance has recently announced that its ethereum like blockchain will accommodate DeFi. Many believe that this project has the potential to cannibalize Binance’s institutional business. CEO Changpeng Zhao believes that if this scenario were to play out, Binance token, BNB, will go up in value which will benefit the Binance company.

Bearish Market Indicators

Rallies come and go, profits come and go, such is the case with the crypto market. It’s important to keep this in mind so that you may be an investor who uses facts as opposed to emotions. There are 3 major indicators that are signaling caution towards bitcoin. Being the grandfather of crypto it’s important to keep your eye on its activity.

Typically, there are gains in volumes and futures contracts sentiment that turn bullish during a rally. This hasn’t been the case for the recent gain of 8% in bitcoin’s price. Although $11k seems more of a physiological barrier as opposed to a resistance, there no signals that traders are confident after recent action. This can be seen in contract funding rates. A funding rate is a measurement of margin being used between the bulls and bears. If the rate is positive, buyers are using more leverage than sellers, indicating bullish confidence. Not every bull run has positive fund rates but it’s highly unusual for upwards movement to continue without it.

Bitcoin perpetual swaps 8-hour funding rate. Source: Skew

This data shows the most recent moment of optimism on September 2nd before bitcoin’s price dropped from $11k. From then on, bears have been more confident than the bulls.

Another indicator to look at is the overall volume that’s moving the market. According to research group Messari, the past 2 days have shown an increase of 13% from the previous 7-day aggregated volume average. This is good but it’s $2.15 billion looks short to the $3 billion peak levels seen over the past 2 months.

7-day Bitcoin aggregated average volume. Source: Messari

The 3rd indicator to look at can be found in Binance’s and OKEx’s data on top traders. Binance has shown data suggesting that professional traders are leading bullish while OKEx’s top trader’s sentiment measurement is showing bearish. Both exchanges use different methodologies so consider changes in each index as opposed to their absolute numbers.

Top traders sentiment & net long/short. Source: OKEx, Binance

With this data set, there is no clear winner. It seems top traders are seeing whether momentum can be created from recent buying pressure or if it’ll die out and revisit $10k.

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