Will UNI’s 70% Rally Last? Risks of Uniswap’s Fee Proposal

Will UNI’s 70% Rally Last? Risks of Uniswap’s Fee Proposal

Leading decentralized exchange (DEX) Uniswap’s UNI token received a massive boost in late February 2024 following a proposal to share platform fees with token holders who delegate and stake their tokens.

Following the announcement, UNI jumped over 70% to a near two-year high of $12.79 on February 24 on expectations of higher demand and lower UNI circulating supply from increased staking on the platform.

Will the latest news affect the long-term Uniswap (UNI) price prediction?

In this article, we analyze Uniswap’s fee-sharing proposal and highlight risks that could cut short the token’s rally.

Uniswap’s Fee Switch Upgrade to Reward UNI Holders

On February 23, 2024, the Uniswap Foundation proposed a network upgrade to implement a fee mechanism that rewards UNI token holders that have delegated and staked their tokens.

The Uniswap Foundation said that the proposed fee mechanism upgrade seeks to invigorate Uniswap’s governance system by incentivizing token delegation and staking.

“Less than 10% of circulating UNI is used to vote on a given proposal. Further, a large portion of existing delegation is ‘stale.’ As of February 1, 2024, 14 of the top 30 delegates by voting power had not voted over the last 10 proposals, and only 7 of these delegates have ever created a proposal,” said Uniswap Foundation.

How Will Uniswap’s Fee Switch Upgrade Work?

At the time of writing, Uniswap collects 0.3% fees on v2 and 0.05% to 1% fees on v3 for swapping tokens, which are paid to liquidity providers (LP).

If the new fee mechanism is approved, UNI stakers and delegators will receive a part of the LP fees.

The fee mechanism proposal is also known as the “fee switch” upgrade because the collection of protocol fees is actually built into the Uniswap protocol. However, the protocol fee collection was never turned on and was initially set to zero.

Here are key details of the proposed Uniswap fee switch upgrade:

  • The protocol fees that will be distributed will be expressed as a fraction of LP fees.
  • The protocol fees will be adjustable by governance and can be 0, 1/4, 1/5, 1/6, 1/7, 1/8, 1/9, or 1/10 of the LP fees.
  • Protocol fees can be set on a pool-by-pool basis.
  • Fees are accrued in both tokens that comprise the pool.

Two new smart contracts will be introduced with the new fee mechanism proposal:

1. V3FactoryOwner.sol

This contract will bring a programmatic, permissionless collection of protocol fees. It will also allow the conversion of those fees into a common ERC20 for distribution to stakers.

2. UniStaker.sol

This contract will manage delegation and fee distribution.

Risks to UNI Token Price From New Fee Mechanism Proposal

News of Uniswap’s proposed fee mechanism that rewards UNI stakers and delegators was cheered by the crypto market participants who pushed the UNI token price to its highest since April 2022.

In this section, we highlight events that could cut short Unswap’s explosive rally.

Protocol Fee-Sharing Approval Awaits

UNI token holders have to bear in mind that the proposed fee-sharing mechanism has not been approved as of February 27, 2024.

The Uniswap community will begin voting on the proposal on March 1, 2024. All Uniswap proposals are subject to a 7-day voting period during which UNI token holders can vote for, against, or abstain from voting.

Although it is widely expected that the proposal will get approved (as it benefits UNI holders who are voting), there are certain members of the Uniswap community for whom the new fee mechanism is unfavorable — Uniswap liquidity providers.

Anndy Lian, an intergovernmental blockchain expert, told Techopedia:

“If the proposal is approved, it would activate the protocol fee switch and distribute a portion of the fees collected by Uniswap to the token holders. This would increase the demand and value of UNI and incentivize more participation and delegation in the governance process.

“However, if the proposal is rejected, it could lead to a sell-off and a drop in the UNI price.”

Uniswap Trading Volume, TVL, and Liquidity Expected to Fall on Protocol Fee Sharing

According to a report by crypto analytics firm Gauntlet, the distribution of protocol fees to UNI stakers and delegators can reduce the profitability of LPs on Uniswap.

The reduced LP yield is expected to cause some of them to withdraw liquidity from Uniswap. The less liquidity in Uniswap’s trading pools might result in higher slippages for traders. The higher slippages might cause poor user experience and force traders to choose rival DEXs, which might ultimately result in decreased trade volume on Uniswap.

It should also be noted that lower trade volume might result in lower protocol fees distributed as the platform collects fees when token swaps occur.

Gauntlet warned that setting extremely high protocol fees would result in the DEX being “unable to retain any LPs.”

The research firm also added that core trading volumes from retail and institutional traders will be less affected than MEV volume, which accounts for 40% to 80% of volume on Uniswap and other DEXs, as MEV trades are more sensitive to market liquidity.

Gauntlet noted:

“At the extreme, a 100% protocol fee should result in a 100% loss of all volume, since such a DEX would be unable to retain any LPs. However, even for an extremely aggressive 80% protocol fee, the simulated DEX still retains substantial core volume. This once again highlights that liquidity is rarely a limiting factor for most of Uniswap’s core users.

“We note that for a viable 10-25% protocol fee, the revenue curves are fairly linear and far from the theoretical maximum. We conclude that a protocol fee in this range would be effective at generating revenue and is unlikely to suffer from diminishing returns due to core volume loss.”

Uniswap (UNI) Price Analysis: Is the Rally Short-Lived?

The rally in UNI token price has cooled since the crypto jumped as much as over 70% on February 23, 2024, following the fee switch upgrade proposal announcement. Token holders took the chance to book profit after UNI hit near two-year highs of $12.79.

Blockchain analytics firm Lookonchain reported that a “Uniswap Team/Investor/Advisor wallet” sold 90,000 UNI tokens from $1.03 million in USDC.

 

Tony Severino, a CMT candidate, technical analyst, and the author of the CoinChartist VIP newsletter, was bullish on the UNI token as he shared his technical analysis on the crypto:

“UNI’s over 50% single-week surge might only be the beginning of a sustained trend change. The clean breakout above the weekly and monthly upper Bollinger Band is a technical buy signal following a nearly two-year accumulation range.”

Elsewhere, CoinCodex data showed UNI token trading at an overbought zone as its 14-day relative strength index stood at 75 points on February 27, 2024. The token traded at $10.05 at the time of writing, above its 200-day simple moving average of $5.68.

The Bottom Line

Uniswap’s fee switch proposal is expected to have lasting consequences if approved.

Although the crypto market is currently focused on the direct benefits that UNI holders hope to enjoy, the resulting effects on Uniswap governance from an approved fee switch upgrade cannot be understated.

The upgrade is expected to incentivize “active, engaged, and thoughtful delegation,” which will ultimately make Uniswap more decentralized, resilient, and community-driven.

 

 

Source: https://www.techopedia.com/uniswap-uni-price-analysis

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Ethereum NFTs rally, with EtherRock and BAYC leading sales

Ethereum NFTs rally, with EtherRock and BAYC leading sales

Additional Comments by Anndy Lian

Pudgy Penguins floor price reached a new all-time high over the weekend. What was the catalyst behind this?

Firstly, I want to give credit to the change in management last year. They have made good decisions during the bear times. Secondly, a possible factor that contributed to the price increase was the general bullish sentiment and growth of the NFT market, especially on the Ethereum network. Pudgy Penguins is one of the oldest and most established NFT collections on Ethereum, and it has a loyal and active fan base. The project has also expanded from 8,888 NFTs to a suite of real-life products and experiences, such as live events, physical merchandise, and licensing opportunities.

Wrapped Ether Rock 46 sold for 496k today, 4 days after BAYC 1726 sold for $668k. What's driving interest in these large sales, that we haven't really seen in months?

Personally, I think the crypto market is anticipated to be more bullish. This brings the degen narrative back to the scene where this is a way to show their social and cultural capital of the NFTs. Wrapped Ether Rock and BAYC are not just digital assets, but also symbols of status and identity in the NFT community. Owning these NFTs grants access to exclusive perks, access special events, and enjoy unique IP rights. Similarly, owning a Wrapped Ether Rock gives the holder a sense of prestige and history, as they own a piece of the early days of NFTs. These NFTs also attract celebrities and influencers, such as Stephen Curry and Jay-Z, who changed his Twitter profile picture on their social media accounts. These endorsements boost the popularity and value of the NFTs, as more people want to join the club and emulate their idols. I believe the same hype will happen again in this bull run.

What is Anndy Lian's official website?

It is https://anndy.com.

 

 

Ethereum-native nonfungible tokens (NFTs) are starting to make a comeback, according to growing sales figures this week.

Wrapped Ether Rock #46 sold for $496,658 on Feb. 12, four days after Bored Ape Yacht Club (BAYC) #1726 was sold for $668,297, according to NFT data aggregator CryptoSlam. These represent the second- and third-largest sales of the month, following the $1.53 million sale of CryptoPunk #5363 on Jan. 31.

According to Anndy Lian, intergovernmental blockchain expert and author of the book NFT: From Zero to Hero, Wrapped Ether Rock and BAYC aren’t just NFTs but represent a status symbol that grants the holder prestige in the NFT community:

“The crypto market is anticipated to be more bullish. This brings the degen narrative back to the scene where this is a way to show their social and cultural capital of the NFTs.”

While the sale of BAYC #1726 seemed a strategic move, the Wrapped Ether Rock sale paints a different trend, Ilan Rakhmanov, founder and CEO of ChainGPT, told Cointelegraph:

“The Ether Rock sale seems like a price pump by someone who is trying to get more attention to the collection, as the actual sale price is much higher than any offer, which averages around $500.”

Ethereum’s NFT sales volume has risen 99.42% over seven days to $159.5 million, driven by a 25% sales increase by the Nobody collection, which generated $8.76 million worth of weekly sales. Bitcoin’s NFT sales fell 25% to $47.5 million during the same period.

According to Yehudah Petscher, NFT strategist at CryptoSlam, nonfungible token traders are shifting back to Ethereum following a surge of interest in Bitcoin Ordinals inscriptions and Solana-native NFTs:

“We used to just have cycles between assets, like crypto, memecoins, NFT art and NFT PFPs. Now, we have cycles between blockchains to factor in, too. Traders move to where there’s liquidity and opportunity, and they saw those opportunities elsewhere.”

Contributing to Ethereum’s sales increase, the Pudgy Penguins collection’s floor price rose to a new all-time high of 21.5 Ether ($53,427) on Feb. 10 before retracing to the current 20.28 ETH ($50.395). This is 13.1% away from the 22.94 ETH ($57,000) floor price of the Bored Ape Yacht Club, the second-largest Ethereum-native NFT collection, according to NFT Price Floor data.

The seven-day sales volume of Pudgy Penguins also rose 143% to $6.8 million, making it the fourth-largest NFT collection by weekly sales volume across all blockchains, according to CryptoSlam.

Interest in the collection started surging in December after the announcement of Pudgy World Alpha, a blockchain-based, open-world gaming experience set to release in Q1 2024.

The NFT market has been in a downtrend since May 2022. The floor prices of top blue-chip NFT collections CryptoPunks and BAYC are down 48% and 82% from their all-time highs, respectively.

 

 

 

Source: https://cointelegraph.com/news/ethereum-nft-market-revival-etherrock-bayc-lead-sales

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Is The Dogecoin Slump Just A ‘Blip’ Before A Rally? Here’s What Experts Say

Is The Dogecoin Slump Just A ‘Blip’ Before A Rally? Here’s What Experts Say

Popular memecoin Dogecoin (CRYPTO: DOGE) slipped about 10% on the heels that new Twitter owner Elon Musk has reportedly halted work on the social network’s crypto wallet.

But experts say the current slump is only a “blip” before a long-term rally on the back of increased use cases for the world’s eighth largest cryptocurrency by market capitalization.

Ever since Tesla (NASDAQ: TSLA (NASDAQ:TSLA)) chief Musk — dubbed the “Dogefather” due to his frequent mentions of the cryptocurrency and engagement with its community — having completed the Twitter deal last week, Doge spiked 150% in value. That’s the highest it has been since April.

Musk recently tweeted a picture of a Shiba Inu sporting a Twitter t-shirt and a pumpkin bearing the Twitter logo, which also led to renewed enthusiasm among investors.

Also, Musk has discussed the possibility of using Dogecoin as a payment method.

Experts believe that the memecoin has performed well over the long term and that there could be a massive shift from Bitcoin (CRYPTO: BTC) mining to Dogecoin mining.

Dogecoin: Integral To Twitter’s X SuperApp Strategy “The way Musk had brought payment utility to Dogecoin and enabled it to be a part of the Tesla merchandise ecosystem, it is obvious that Dogecoin will become integral to Twitter’s X SuperApp strategy,” says Sharat Chandra, VP of Research and Strategy, at EarthID. “The current correction in Dogecoin prices is a blip. The utility of Dogecoin in Twitter’s overall Web3 wallet and SuperApp play will increase manifold in the coming months. Therefore, Dogecoin prices might shoot north in the long term.”

Also read: What The Fed’s Latest Interest Rate Hike Means For The Crypto World

Correction In Prices Was Anticipated Raj Kapoor, an advisor at several blockchain companies and the Founder and Chairman of the India Blockchain Alliance said that Dogecoin remains bullish over the medium term until it sustains above $0.1200, a 38.2% Fibonacci retracement level.

Four days of a winning streak led to its price increase by over 150% and, after a rally of such magnitude, a minor correction was anticipated, he explained.

“Investors could use every dip 20-25% dip in Dogecoin for medium to long-term buying, as with Elon at the helm of Twitter, it is very likely that the crypto will be promoted in all possible ways by him. Even if reports of a crypto wallet being put on hold by Twitter were true, I suspect it is only temporary. Apart from this several new use cases for Dogecoin are expected to come up shortly,” Kapoor said.

A Golden Era For Dogecoin Anndy Lian, book Author of “NFT: From Zero to Hero,” expects to see Musk lead initiatives at Twitter that will drive the price of Dogecoin.

“Imagine enabling payment using Dogecoin for the new Twitter blue subscription at $8. This simple move for instance could push its price to new highs. This is more on the shorter term basis,” he says.

“Looking at the longer term, Dogecoin has survived and done well in multiple bull and bear cycles. Dogecoin is considerably faster and easier to mine than Bitcoin. It also has a lower mining difficulty. Based on the current price situation in the PoW mining space, there might be more miners switching to Dogecoin mining. This could be a new trend,” Lian adds.

 

Source: https://uk.investing.com/news/stock-market-news/is-the-dogecoin-slump-just-a-blip-before-a-rally-heres-what-experts-say-2813064

https://www.benzinga.com/markets/cryptocurrency/22/11/29573929/is-the-dogecoin-slump-just-a-blip-before-a-rally-heres-what-experts-say

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j