Uniswap, a pioneer in the Decentralized Exchange (DEX) domain, has recently experienced a remarkable surge in its Liquidity Provider (LP) fees. This hike in fees can be attributed to the high volume of trades taking place on the platform, which has been rising rapidly in recent times.
Despite a slump in its price, the Uniswap network has witnessed substantial growth, and its native token, UNI, has exhibited a surge in velocity. This suggests that despite the price decline, the token has been actively changing hands among investors, indicating a heightened level of engagement and investment activity.
Furthermore, the growing lack of confidence in Centralized Exchanges (CEXs) has led to a paradigm shift towards DEXs, with more users opting for the latter. This shift in investor behavior has resulted in a significant increase in trading volume on DEX platforms like Uniswap, further driving its growth and success.
Reaping the benefits
One way through which Uniswap benefitted from the high DEX volume was through the spike in its LP (Liquidity Pool) fees. In March, Uniswap’s LPs earned $77 million in fees.
DEX trading is at a high right now which means so are rewards for LPs ✨
In March alone, Uniswap LPs earned $77M in fees. pic.twitter.com/XkFPkITJy2
— Uniswap Labs 🦄 (@Uniswap) April 7, 2023
However, this growth of the Uniswap protocol could be short-lived. According to Token Terminal’s data, the daily active users on the Uniswap protocol fell by 4% in the last month. Along with that, the treasury holdings of Uniswap diminished as well.
Source: token terminal
Another concerning factor for the protocol would be its progress in the NFT department. During the time of its release, Uniswap’s NFT marketplace saw tons of volume. However, with time, as its hype declined, the volume of NFT transactions on Uniswap plummeted from $120,000 to $15,000, per Dune Analytics.
However, these factors haven’t impacted Uniswap’s dominance in the DEX market. At press time, Uniswap had captured 63.5% of the overall DEX market share.
Source: Dune Analytics
How did UNI react?
However, Uniswap’s protocol dominance did not translate to the UNI token’s progress. According to Santiment’s data, the price of UNI fell considerably over the last few days. Coupled with that, UNI’s network growth also fell, implying that interest from new addresses in the token had waned.
On the other hand, UNI’s velocity surged, indicating that the frequency with which UNI was being traded had increased.
Source: Santiment
These factors didn’t deter traders from being hopeful about UNI. According to Coinglass’ data, the number of short positions taken against UNI had decreased over the past few weeks.
Source: Coinglass
