Uniswap was one of 2021’s greatest success stories. In the last few months, there has been a wild internet buzz about the number of people earning not just from its price jump but also from its liquidity pools.
Right from the start, one could tell the UNI token was destined to make bold moves. It launched in September 2020, and its entry into the crypto market was marked with a generous airdrop that awarded 400 tokens to anyone who had interacted with their DEX platform before.
It had a listing price of $0.48. But this would shoot to $7 within the first 48 hours. Almost two years later, the coin is trading around the $14 mark, a slip from its all-time high of $44.97.
Uniswap wasn't spared the crypto market meltdown at the end of last year.
But is Uniswap worth buying? Why would anyone convince you to buy UNI, and what are the risks associated with UNI investments?
We answer all these and tell you everything else you need to know about investing in Uniswap in 2022.
What is Uniswap?
Unsiwap is an Ethereum-based decentralized exchange and a decentralized finance (DeFi) protocol. It recently launched the UNI governance tokens, which facilitate transactions within the platform.
But you probably know it as the first decentralized exchange to successfully embrace the Automated Market Maker (AMM) liquidity provision protocol. Or perhaps due to its affiliation with Ethereum blockchain founder - Vitalik Buterin.
The DEX was launched in November 2018 by an Ethereum developer - Hayden Adams - in line with the AMM protocol. However, the original idea of an exchange that follows the AMM protocol was first suggested by Vitalik Buterin - hence the close association.
To a large extent, Uniswap exists to facilitate token swaps and create liquidity for the DeFi ecosystem.
Unlike all other swap platforms and liquidity providers, however, Uniswap stands out because it was able to automate the liquidity provision process.
Other Uniswap identifying factors include the fact that it is anti-inflationary and has the maximum supply of UNI tokens capped at 1 Billion coins. But it currently has a circulating supply of 627.93 Million and a market cap of $9.4 Billion.
Why is Uniswap so Popular Right Now?
Uniswap’s popularity can be largely attributed to its unique approach to the industry as well as its reliability. You could also be right if you feel that - especially its affiliation with Ethereum developer and founder - has helped give its token prices a boost.
We must also remind ourselves that the launch of Sushiswap - a Uniswap fork - in August 2020 also helped boost its popularity. Naturally, crypto-project forks are intended to draw from the goodwill of an established brand by offering its users something newer, exciting, and supposedly better.
But Sushiswap did the exact opposite, and this saw most DeFi enthusiasts consolidate around Uniswap.
It took the industry by a storm, especially since it beat Uniswap to launch the Sushi token. But barely a month into its existence, its creator pulled one of the most irresponsible heists in what has now come to be known as the Sushiswap exit scam.
This saw most of its investors run back to Uniswap, the more transparent and more reputable Unsiwap. And the fact that all this came at a time when the DeFi environment growth was exploding proved advantageous to Uniswap as it has since won the attention of any serious DeFi investor looking for a reputable DeFi/DEX protocol.
These have helped UNI rise to position 23rd on the list of largest cryptocurrencies by market cap (according to the Coinmarketcap). DeFi Pulse also ranks the token seventh on its list of largest and most popular decentralized exchanges with more than $8.29 Billion locked in its liquidity pools.
So, Should I Buy Uniswap?
Your decision to buy or not to buy Unswap tokens should be solely influenced by your risk tolerance, not the fear of missing out.
The crypto’s rapid price jump in the last year has given it out as a viable investment. Plus, it has a team of highly experienced developers and innovative technology to boot.
The fact that it seeks to address a persistent problem within the crypto community reinforces the idea that it is here to stay.
But as much Unsiwap sends out indicators that it is a worthy investment in the form of constantly up-trending price action and purpose-driven white paper, it is a cryptocurrency. It is still a highly volatile digital asset that is prone to unplanned price drops and stagnation.
So how do you approach Uniswap investment?
Like you would any other investment - cryptocurrency or traditional stock. Start by learning as much as you can about the cryptocurrency, particularly how it works and its price triggers. But even with this information, don’t just commit all your funds to the crypto. Rather start small while analyzing any progress.
In each step of the Uniswap investment journey, remember that cryptos are highly risky, and values can drop to $0. This should inform your decision to only invest what you can afford to lose.
Why You Should Buy Uniswap
Uniswap is already one of the most popular DeFi protocols. It is also one of the most sought-after crypto investments. But if these aren’t enough to convince you why you need to invest in Uniswap, here are three more:
- It has posted positive ROI: While it may be a relatively new altcoin, Uniswap has maintained a strong positive ROI. Even with the declining prices (having slumped to $14 at the time of writing), Uniswap can still take pride in the enviable ROI exceeding 821.17%.
- Double earnings from liquidity and token value appreciation: Uniswap presents you with an opportunity to contribute liquidity to the DeFi environment and share in the fees and other charges accrued by the pool. This represents double income as you get to earn interest on liquidity while the actual token appreciates in value.
- Potential for massive adoption: Uniswap is one of the fastest-growing cryptocurrencies. And its potential for eventual adoption as a currency by different platforms is unlimited.
Risks Associated With Uniswap Investment
When we say cryptocurrencies are risky, we aren’t just talking about their unprecedented price jumps. Here are three other risk factors that you need to consider when interacting with the token.
- It is new and untested: By saying that Uniswap is new and untested, we imply that it hasn’t been around long enough to leave a stream of technical and fundamental data that could be used to make accurate price predictions.
- Its use is limited to the ETH network: This is to imply that there isn’t much you can do with UNI tokens save for transacting within the decentralized exchange.
- Partner network risks: This means that the current UNI token prices will also be highly affected by anything that affects its partner blockchains and protocol. Here is an example, when ETH prices fall, UNI tokens slump. To understand how this works, you only need to look at the recent upshot of Eth transaction fees (GAS) that saw most DeFi clients turn to competitor platforms like Pancakeswap on Binance Smart Chain.
Don't Miss: Uniswap Price Predictions
There is pretty much everything you need to know when deciding on whether or not to buy Uniswap now - or later in the year.
The key takeaway here is that Uniswap is a viable digital investment as reflected in its overall positive ROI, reputed development team, and visionary goal.
But you still need to conduct adequate research on the coin and the factors influencing its prices before making the purchase. And if you are inexperienced with crypto trading, start with a small investment that you can afford to lose.
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Virtual currencies are highly volatile. Your capital is at risk.