Yes, Uniswap [UNI] was king in 2022, but at what cost?

This yr, the cryptocurrency market noticed a big lower in worth, dropping over $1.4 trillion. This decline was resulting from numerous points confronted by the {industry}, together with failed initiatives and an absence of liquidity.

The {industry} confronted a number of challenges, with various distinguished gamers throughout the ecosystem submitting for chapter, together with BlockFi, Celsius, Voyager, Three Arrows Capital, and, extra not too long ago, FTX and Alameda.

The decentralized finance (DeFi) vertical suffered an analogous decline as general complete worth locked (TVL) – the full worth of all belongings held inside a DeFi product – throughout all protocols plummeted by 77%. The trigger behind the decline in DeFi TVL just isn’t far-fetched. 

A 35.51x hike on the playing cards if UNI hits ETH’s market cap?

In 2020, the U.S authorities applied stimulus packages that resulted in a rise within the provide of U.S {dollars}, resulting in larger demand and rising costs (inflation) in 2021. 

Nevertheless, as a way to fight this rising inflation, the Federal Reserve raised rates of interest in 2022. This made borrowing cash dearer and inspired traders and customers to cut back spending. 

Consequently, traders moved away from speculative belongings class (cryptocurrencies) to place their cash in risk-free yields on U.S treasuries. This led to a extreme decline within the worth of a number of crypto-assets, the yield on DeFi investments, and DeFi TVL typically.

Supply: DefiLlama

Uniswap’s numerous variations: A 2022 retrospective

Launched in 2018, Uniswap is a decentralized cryptocurrency buying and selling protocol whereby customers can commerce cryptocurrency belongings. 

The unique model of the Uniswap protocol, often known as Uniswap V1, was launched as a trial run to evaluate the effectiveness of the automated market maker (AMM) liquidity mannequin. In Could 2020, Uniswap V1 was changed by Uniswap V2, which launched quite a few enhancements and new options to the platform.

Uniswap V3, launched in Could 2021, rapidly gained reputation in 2022 because it launched a collection of necessary upgrades to the DEX. This included concentrated liquidity, versatile transaction charges, and vary orders.

This collection of upgrades launched by Uniswap V3 led to its fast adoption, which induced its TVL to develop considerably above the 2 earlier variations. As per knowledge from DeFiLlama, Uniswap V3’s TVL of $2.45 billion represented a 74% share of complete TVL for Uniswap. 

In 2022, Uniswap V3 rapidly overshadowed DEXs that existed earlier than it as elevated utilization led to a progress in its share of the full DEX buying and selling quantity. 

What number of UNIs are you able to get for $1?

As of January 2022, Uniswap V3 held a 39.4% share of complete buying and selling quantity by DEXs, knowledge from Dune Analytics revealed. By Could, its share of complete buying and selling quantity had peaked at 72%. 

Apparently, Uniswap V3’s place was threatened through the FTX debacle as different DEXs noticed elevated utilization resulting from traders’ flight from centralized exchanges to DEXs. Consequently, its share of complete DEX buying and selling quantity fell to the touch a low of 36.5% on 11 November. This was its lowest level all through the 12-month interval.

This rebounded not lengthy after and was noticed at 46.5% as of 29 December. On a year-to-date foundation, Uniswap V3’s share of the full DEX buying and selling quantity grew by 27%. 

Supply: Dune Analytics

Uniswap V3’s excessive buying and selling quantity was attributable to the constant progress within the rely of its each day customers. As per knowledge from Dune Analytics, the regular progress in each day person rely positioned it atop all different DEXs because the DEX with probably the most on a regular basis customers. 

When FTX collapsed, Uniswap v3 logged a each day excessive rely of 25,552 customers on 9 November. It noticed probably the most inflow of customers from centralized exchanges amid the market turmoil attributable to the surprising FTX turmoil. 

As of 29 December, Uniswap v3 had a each day person rely of 12,949.

Supply: Dune Analytics

Regardless of the numerous success recorded by its V3 deployment in 2022, Uniswap couldn’t escape the impression of the extreme bearishness that induced many DeFi protocols to register a decline inside a 12-month interval.

Uniswap’s month-to-month buying and selling quantity peaked in January when the DEX logged a buying and selling quantity of $71 billion. Nevertheless, this declined steadily to $17 billion by December.

Supply: Dune Analytics

Uniswap: Key efficiency indicators in 2022

Uniswap noticed a steep decline in buying and selling quantity within the first three quarters of the yr. In accordance with knowledge from Messari, the main DEX closed This fall 2021 with a buying and selling quantity of $238.28 billion. 

By the top of Q1 2022 when the bear market turned fully-fledged and traders started shifting capital to U.S treasury payments, Uniswap’s buying and selling quantity had fallen by 21%. It closed the quarter with a buying and selling quantity of $189 billion.

Issues didn’t get higher in Q2. Terra LUNA’s grave demise created a contagion that led to the collapse of a number of different gamers within the {industry}. Buying and selling quantity throughout DeFi protocols fell, and DeFi TVL declined additional. Uniswap closed Q2 with a buying and selling quantity of $172 billion, an 8% decline QoQ.

This was adopted by a fair steeper decline of 30% in buying and selling quantity by the top of Q3, Messari reported.

Along with a fall in buying and selling quantity, equipped liquidity on Uniswap fell as effectively. With end-of-period liquidity of $3.9 billion by the top of Q3, this had fallen by over half of its worth because the starting of the yr.

Likewise, charges paid to liquidity suppliers on Uniswap fell all year long. 

Supply: Messari

UNI had a troublesome time

UNI is a governance token for the Uniswap protocol, permitting holders to vote on adjustments to the protocol and take part in its decision-making processes. It’s also used as a utility token throughout the Uniswap platform, permitting customers to entry sure options and companies.

In direction of the start of the yr, the token was buying and selling at $17.1, as per knowledge from CoinMarketCap. This value degree remained UNI’s highest promoting value level through the 2022 bear market. 

Exchanging arms at $5.01 on the time of writing, UNI’s worth appears to have declined by over 71% in 2022.

Supply: CoinMarketCap

Concluding ideas

Uniswap confronted a troublesome yr resulting from a difficult macroeconomic atmosphere, geopolitical uncertainty, and institutional liquidation. Though the DEX noticed a decline in buying and selling exercise through the yr, Uniswap strengthened its place within the crypto-industry by establishing an funding group and an NFT market aggregator. These strikes have positioned the protocol to proceed to be a key participant within the crypto-economy.

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