In 2016, Ethereum founder Vitalik Buterin shared his vision of a decentralized exchange (DEX) that featured a fully automated market maker. Having the market maker automated eliminates the issue that professional market makers receive little to no incentive when providing liquidity for illiquid assets. What makes Uniswap a standout project is that it overcomes the price slippage problem when trading assets with low liquidity.
Former Siemens engineer Hayden Adams set forth to bring Vitalik’s vision to life. On November 2, 2018, the Uniswap protocol made its world premiere. In September 2020, the UNI token debuted in 1 of the most landmark token air-drops in history. Any user of the platform up to that point received 400 UNI tokens just for using the platform. The UNI token value was around $3 at the time of the air-drop. With the release of Uniswap Version 3 (V3) in 2021, this robust albeit young protocol continues to innovate and push the decentralized finance (DeFi) space forward.
What Is Uniswap?
Uniswap is an Ethereum-based DEX that facilitates the trading of ERC20 tokens via smart contracts. To overcome the liquidity issue, users become market makers by adding their ERC20 token and the equivalent value of its network token, Ether (ETH) into a pool of tokens. Uniswap allows anyone to become a market maker and earn a liquidity provider fee of 0.3%. Users make higher profits based on the volume of trades going through the platform.
A feature that makes Uniswap a leader in the DeFi space is the unique way it derives the price of an asset. Uniswap determines the cost of a token with a system that balances the swap of 1 token for another then renders the price. The formula is x * y = k, where x and y represent the quantity of ETH and ERC20 tokens available in a liquidity pool and k is a constant value. This method makes Uniswap 1 of the most powerful financial instruments ever created.
Uniswap Market Capitalization
The current market cap of Uniswap as of August 2021 is around $17 billion, making it the 11th biggest cryptocurrency according to CoinMarketCap ($16,953,866,909). The current price of a single UNI coin is just under $29 — a long way from the air-drop price of $3.
In investing, the price of an asset is irrelevant — it’s all about market capitalization in determining a coin’s value. The market cap usually reveals the amount of risk involved in investing in a project. The 11th highest market-cap Uniswap shows strong popularity and confidence in the protocol, considering many other DEXs compete.
From an investment perspective, Uniswap’s large-cap status (over $10 billion) makes it generally classified as a “safe” investment. Although Uniswap is a large-cap project, it’s also a young project in a growing industry. Lots of potential upside could emerge as the DeFi space continues to gain mass adoption. Choosing Uniswap gives you the best of both worlds — a growing, early-stage project with lower volatility than small market cap altcoins.
Bull Case for Uniswap
Most crypto analysts see the outlook for Uniswap as bullish. As of August 2021, the Bitcoin (BTC) price is trying to break above $50,000 and continue its bullish course. The Uniswap price is currently trying to break above the $25 to $30 range. A bold move to the upside where the Uniswap price closes above $32 will confirm the bullish scenario. This move will signal that the bulls are still active in the market.
Uniswap has already established itself as #1 in the DEX space by a longshot. The rollout of the V3 iteration could help the UNI price skyrocket. The Uniswap project also receives backing from Silicon Valley companies betting on crypto projects that can disrupt the current financial industry.
Bear Case for Uniswap
Although being the leader in the DEX space, Uniswap is not without competition. SushiSwap, Binance’s PancakeSwap and the Polygon-powered QuickSwap are probably its biggest competitors. Increasing competition amongst DEXs could eventually dethrone Uniswap as the undisputed leader.
Due to lower transaction fees and faster transaction speeds, QuickSwap has attracted a new wave of investors. Investors who have smaller amounts to invest may choose Quikswap. If QuickSwap overtakes Uniswap in the number of active wallets, the change will indicate a shift in the crypto audience. The current landscape is full of big investors moving vast sums of money around, so they don’t mind the higher fees on Ethereum's network.
Before investing, you should understand the risks involved in buying the Uniswap token. The crypto markets are turbulent, and there’s the possibility that you could lose your investment. One of the largest threats to the growth of DeFi as a whole is that regulators are looking to crack down on the protocols, which could negatively affect Uniswap.
Where to Buy Uniswap
You can buy the UNI token at several exchanges, including Coinbase and eToro. Each exchange has unique benefits, so do your due diligence in choosing where to make your purchase. Beginners in the crypto space may find a centralized exchange like Coinbase easier to get started with than a DEX.
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How Long Will it Take for Uniswap to Reach $100?
If Bitcoin continues on its ascent to $100k, Uniswap could reach $100 before the end of 2021. A more conservative analysis predicts that UNI will most likely obtain the milestone of $50 by year’s end and proceed to reach $100 by the end of 2023.
Take these predictions lightly due to the highly explosive nature of the crypto markets. Since its lowest price point of under $4 in September 2020, UNI has soared over 800%. This type of price action on a budding project could indicate that Uniswap may be an excellent long-term investment. However, you have to be prepared for the ups and downs of the crypto markets to reach your goals. In the meantime, you could become a market maker by staking your UNI tokens in the platforms’ liquidity pools and earn a profit while the project continues to develop.
Where to Store Uniswap Safely
Leaving your crypto assets on an exchange is not the safest way to store your tokens. If you don’t control the wallet’s private keys, then you don’t own the asset. In the event of a hack, you could lose all your precious tokens. The best practice is to store your resources offline in a hardware wallet or an online software wallet, depending on your preference.
Best Hardware Wallet: Ledger Nano X
The Ledger Nano X is the best choice in hardware wallets because it’s super secure and connects to Bluetooth or USB, depending on whether you’re on a desktop or mobile. Although the device is an offline storage hardware wallet, the Ledger also has software that presents a sleek user interface to help users manage their portfolios.
Best Software Wallet: ZenGo
ZenGo wallet is a mobile software wallet with an easy-to-use interface and a built-in exchange. This software wallet is superb for beginners because it has an outstanding support team to assist with any questions. It also eliminates the need for keeping track of private keys and seed phrases by using facial biometrics.
One of the biggest reasons to invest in Uniswap is the V3 upgrade, which increases capital efficiency dramatically. This improvement prevents price slippage during transactions. In addition, users who decide to become liquidity providers (LPs) can earn more profits through fee sharing.
Current Crypto Prices
After a brutal past few months, the crypto markets are starting to look healthy again as Bitcoin attempts to break $50k. Ethereum (ETH) may continue to rise above $3k due to increasing scarcity. The recently implemented Ethereum Improvement Proposal (EIP) 1559 destroys the ETH collected from transaction fees. The EIP has resulted in the network burning about 3 ETH per minute on average.
Cryptocurrency can be a wild journey full of extreme highs and lows, so don’t stress out over day-to-day price action. The best practice would be to research a project’s team, technology and tokenomics. Once you find a solid project, hold it in your wallet and allow the project time to develop. Also, remember, never invest more than you can afford to lose because even good projects could fail.
So, Is Uniswap a Good Investment?
Most analysts concur that Uniswap is a tremendous long-term investment. Silicon Valley venture capitalists are also backing Uniswap and betting on the future expansion of the DeFi space. In addition, Uniswap V3 has made it even more attractive for users who decide to become liquidity providers because they can earn higher rewards.
Adding more liquidity to Uniswap increases the volume on the exchange and could potentially increase the token price. If its steady growth continues as predicted, Uniswap investors should be delighted with the outcome.
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