Uniswap's UNI Token Experiences Mixed Trading Activity, Market Cap Growth but Low Liquidity

Uniswap (UNI) experienced a surge in market cap, up 11%, reaching $4.67 billion. Despite this, its trading volume and derivatives volume saw significant declines. High short liquidations indicated a bearish price shift, with liquidations totaling nearly $147,000. Low liquidity in the UNI market was suggested by a volume-to-market cap ratio of 3.25%. On-chain data showed an increase in outflows from exchanges to wallets and a rise in inflows from wallets to exchanges. The majority of UNI holders, 85%, own more than 1% of the circulating supply. The price of UNI was found to be closely correlated with Bitcoin (BTC).

Introduction:

Uniswap (UNI), the leading decentralized exchange (DEX) on Ethereum, experienced a notable surge in market capitalization, reaching an impressive $4.67 billion on March 13, 2023. Despite this uptick, the platform's trading volume and derivatives volume saw significant declines. This article delves into the potential reasons behind this discrepancy, the impact of short liquidations, and the correlation between UNI and Bitcoin.

Declining Trading Volume and Derivatives:

Amidst the surge in market capitalization, UNI's trading volume and derivatives volume experienced a significant decline. According to Dune Analytics, UNI's trading volume dropped to $3.3 billion, down from its peak of $11.84 billion on March 12, 2023. The decline in derivatives volume was even more pronounced, dropping to $66.3 million from a high of $1.16 billion during the same time period.

Short Liquidations and Bearish Price Shift:

The decline in trading volume and derivatives was accompanied by a significant increase in short liquidations. According to data from Dune Analytics, short liquidations totaled nearly $147,000 during the period, indicating a bearish price shift. The low liquidity in the UNI market was also highlighted by a volume-to-market cap ratio of 3.25%.

On-Chain Data:

On-chain data further supported the bearish sentiment. An increase in outflows from exchanges to wallets and a rise in inflows from wallets to exchanges were observed, indicating a potential shift in sentiment among investors.

Correlation with Bitcoin:

The price of UNI was found to be closely correlated with Bitcoin (BTC). As Bitcoin experienced a significant decline, dropping to as low as $19,200 on March 12, 2023, UNI's price followed suit, falling from $1 to $0.887. This correlation was highlighted by data from Dune Analytics, which showed that UNI's price had a correlation coefficient of 0.82 with Bitcoin over the past year.

Conclusion:

In conclusion, while Uniswap (UNI) experienced a notable surge in market capitalization on March 13, 2023, its trading volume and derivatives volume saw significant declines. This discrepancy was attributed to a bearish price shift, as indicated by short liquidations and a correlation with Bitcoin. Despite the bearish sentiment, the long-term prospects for UNI and the broader DeFi market remain promising.

[1] https://bsc.news/post/uniswap-surges-to-new-heights-record-breaking-11-84-billion-in-daily-volume