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

1 year ago 103

This year, the cryptocurrency marketplace saw a important alteration successful value, losing implicit $1.4 trillion. This diminution was owed to assorted issues faced by the industry, including failed projects and a deficiency of liquidity.

The manufacture faced respective challenges, with a fig of salient players wrong the ecosystem filing for bankruptcy, including BlockFi, Celsius, Voyager, Three Arrows Capital, and, much recently, FTX and Alameda.

The decentralized concern (DeFi) vertical suffered a akin diminution arsenic wide full worth locked (TVL) – the full worth of each assets held wrong a DeFi merchandise – crossed each protocols plummeted by 77%. The origin down the diminution successful DeFi TVL is not far-fetched. 

35.51x hike connected the cards if UNI hits ETH’s marketplace cap?

In 2020, the U.S authorities implemented stimulus packages that resulted successful an summation successful the proviso of U.S dollars, starring to higher request and rising prices (inflation) successful 2021. 

However, successful bid to combat this rising inflation, the Federal Reserve raised involvement rates successful 2022. This made borrowing wealth much costly and encouraged investors and consumers to trim spending. 

As a result, investors moved distant from speculative assets people (cryptocurrencies) to enactment their wealth successful risk-free yields connected U.S treasuries. This led to a terrible diminution successful the worth of respective crypto-assets, the output connected DeFi investments, and DeFi TVL generally.

Source: DefiLlama

Uniswap’s assorted versions: A 2022 retrospective

Launched successful 2018, Uniswap is simply a decentralized cryptocurrency trading protocol wherein users tin commercialized cryptocurrency assets. 

The archetypal mentation of the Uniswap protocol, known arsenic Uniswap V1, was launched arsenic a proceedings tally to measure the effectiveness of the automated marketplace shaper (AMM) liquidity model. In May 2020, Uniswap V1 was replaced by Uniswap V2, which introduced galore enhancements and caller features to the platform.

Uniswap V3, launched successful May 2021, rapidly gained popularity successful 2022 arsenic it introduced a bid of important upgrades to the DEX. This included concentrated liquidity, flexible transaction fees, and scope orders.

This bid of upgrades introduced by Uniswap V3 led to its accelerated adoption, which caused its TVL to turn importantly supra the 2 erstwhile versions. As per information from DeFiLlama, Uniswap V3’s TVL of $2.45 cardinal represented a 74% stock of full TVL for Uniswap. 

In 2022, Uniswap V3 rapidly overshadowed DEXs that existed earlier it arsenic accrued usage led to a maturation successful its stock of the full DEX trading volume. 

How many UNIs tin you get for $1?

As of January 2022, Uniswap V3 held a 39.4% stock of full trading measurement by DEXs, information from Dune Analytics revealed. By May, its stock of full trading measurement had peaked astatine 72%. 

Interestingly, Uniswap V3’s presumption was threatened during the FTX debacle arsenic different DEXs saw accrued usage owed to investors’ formation from centralized exchanges to DEXs. As a result, its stock of full DEX trading measurement fell to interaction a debased of 36.5% connected 11 November. This was its lowest constituent passim the 12-month period.

This rebounded not agelong aft and was spotted astatine 46.5% arsenic of 29 December. On a year-to-date basis, Uniswap V3’s stock of the full DEX trading measurement grew by 27%. 

Source: Dune Analytics

Uniswap V3’s precocious trading measurement was attributable to the accordant maturation successful the number of its regular users. As per information from Dune Analytics, the dependable maturation successful regular idiosyncratic number placed it atop each different DEXs arsenic the DEX with the astir mundane users. 

When FTX collapsed, Uniswap v3 logged a regular precocious number of 25,552 users connected 9 November. It saw the astir influx of users from centralized exchanges amid the marketplace turmoil caused by the unexpected FTX turmoil. 

As of 29 December, Uniswap v3 had a regular idiosyncratic number of 12,949.

Source: Dune Analytics

Despite the important occurrence recorded by its V3 deployment successful 2022, Uniswap could not flight the interaction of the terrible bearishness that caused galore DeFi protocols to registry a diminution wrong a 12-month period.

Uniswap’s monthly trading measurement peaked successful January erstwhile the DEX logged a trading measurement of $71 billion. However, this declined steadily to $17 cardinal by December.

Source: Dune Analytics

Uniswap: Key show indicators successful 2022

Uniswap saw a steep diminution successful trading measurement successful the archetypal 3 quarters of the year. According to information from Messari, the starring DEX closed Q4 2021 with a trading measurement of $238.28 billion. 

By the extremity of Q1 2022 erstwhile the carnivore marketplace became fully-fledged and investors began moving superior to U.S treasury bills, Uniswap’s trading measurement had fallen by 21%. It closed the 4th with a trading measurement of $189 billion.

Things did not get amended successful Q2. Terra LUNA’s sedate demise created a contagion that led to the illness of respective different players successful the industry. Trading measurement crossed DeFi protocols fell, and DeFi TVL declined further. Uniswap closed Q2 with a trading measurement of $172 billion, an 8% diminution QoQ.

This was followed by an adjacent steeper diminution of 30% successful trading measurement by the extremity of Q3, Messari reported.

In summation to a autumn successful trading volume, supplied liquidity connected Uniswap fell arsenic well. With end-of-period liquidity of $3.9 cardinal by the extremity of Q3, this had fallen by implicit fractional of its worth since the opening of the year.

Likewise, fees paid to liquidity providers connected Uniswap fell passim the year. 

Source: Messari

UNI had a pugnacious time

UNI is simply a governance token for the Uniswap protocol, allowing holders to ballot connected changes to the protocol and enactment successful its decision-making processes. It is besides utilized arsenic a inferior token wrong the Uniswap platform, allowing users to entree definite features and services.

Towards the opening of the year, the token was trading astatine $17.1, arsenic per information from CoinMarketCap. This terms level remained UNI’s highest selling terms constituent during the 2022 carnivore market. 

Exchanging hands astatine $5.01 astatine the clip of writing, UNI’s worth seems to person declined by implicit 71% successful 2022.

Source: CoinMarketCap

Concluding thoughts

Uniswap faced a hard twelvemonth owed to a challenging macroeconomic environment, geopolitical uncertainty, and organization liquidation. Although the DEX saw a diminution successful trading enactment during the year, Uniswap strengthened its presumption successful the crypto-industry by establishing an concern squad and an NFT marketplace aggregator. These moves person positioned the protocol to proceed to beryllium a cardinal subordinate successful the crypto-economy.

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