What Is Uniswap And Is It Worth Investing In 2021?
Throughout this year’s crypto market rally, you’ve probably seen individuals cash in profitably on popular crypto investments like Uniswap. But just as you mustered the courage to buy your first UNI token, the market run skid, and the crypto prices start plummeting?
Now, you are wondering if Uniswap is still worth investing in 2021?
We intend to answer this question and help you arrive at an informed investment decision by the end of this guide.
For starters, Uniswap has had an undeniably successful year this far, with its prices increasing eightfold in the last five months. It also attracted a massive following in the eight months after its launch that saw it accumulate a $20+ Billion market cap and overtook control of over 6% of all the close to $60 Billion locked in the DeFi ecosystem.
On Coinmarketcap’s list of the most valuable cryptocurrencies, Uniswap has the 11th largest market capitalization, dethroning the long-timer and oldest bitcoin fork - Litecoin.
But what is Uniswap, and what makes it a worthy investment in 2021?
We answer these and tell more about UNI in the guide below.
What is Uniswap?
Uniswap is an ERC-20 token built on the Ethereum-blockchain and specially designed to serve as the native token for the Uniswap DeFi protocol.
The cryptocurrency is barely eight months old, having been launched in September 2020. Its parent protocol, the Uniswap decentralized exchange has, however, been around for more than two and half years, having launched in November 2018.
It is not common for a blockchain or DeFi protocols to launch and go for years without complementing it with its native digital currency. To this day, that crypto industry tradition has most investors and market experts believing that UNI token creation and launch was an afterthought. And the conspiracy is especially fuelled by the fact that Uniswap only launched the token less than a month after the launch of its fork, Sushiswap and its Sushi token.
Why Is Uniswap So Popular Right Now?
Today, Uniswap can credit much of its popularity to two key factors, namely the DeFi explosion and the Sushiswap exit scam.
It is ironic that while Sushiswap was designed to steal attention and probably clients from Uniswap, its establishment only helped affirm the latter’s reputation and make it even more popular.
But none of this was ever intentional.
Less than a week after Sushiswap protocol and token launch on 28TH August 2020, its anonymous founder (Chef Nomi) exit-scammed the protocol by liquidating his $14 million Ethereum stash.
After a major uproar, he returned the funds, but his actions had the net effect of painting Sushiswap in a bad light - as a fraudulent DeFi project. And his timing couldn’t have been any worse as it was during this time that the DeFi ecosystem was blowing up. The news about the scam shone light on Uniswap as the more reliable and reputable DeFi DEX, effectively helping it rank up to become the second-largest DEX on the Ethereum blockchain.
But these aren’t the only factors contributing to Uniswap’s massive popularity. Others include:
The generous airdrop: Uniswap was already an established and rather popular DEX within the DeFi circles before the launch of UNI tokens. During the launch of the 1 Billion UNI tokens, its founders made a generous offer (15% of total supply) to anyone who has ever used the platform prior to the launch date.
Gifting each one 400 UNI tokens valued at $0.48 each. This ingenious marketing trick had everyone in the crypto community talking about the token, especially after its prices jumped by more than 1500% to $7 in the first 48 hours of trading.
Perceived association with Ethereum and Vitalik Buterin: Uniswap stands out because of its use of the Automated Market Maker (AMM) liquidity provision model. And while this model was actualized by Ethereum developer - Hayden Adams - he borrowed the idea from Ethereum Blockchain co-founder Vitalik Buterin. This small association between Uniswap and Vitalik has helped give the protocol credence in the face of investors and make it popular in the crypto community.
Read Also: Will Uniswap (UNI) Make Me Rich?
So, Should I Buy Uniswap?
The decision to or not to invest in Uniswap should be informed by such factors as your disposable income, your investing goals, risk tolerance, and your perception of the altcoin’s sustainability.
The first indicator that Uniswap is a good buy is its impressive price history - most of which was organic - free of social media hype and celebrity endorsements. This is to say that much of the 8000% price jump reported by Uniswap at its peak was an appreciation of its value by the crypto community.
It is a testament that the UNI altcoin will remain valuable long after the hype dies down and celebrities turn to more exciting coins or non-crypto projects.
Remember that your perception of the UNI altcoin’s sustainability should be informed by more than just your gut feeling. It should take into account the factors influencing the price of the altcoin, its impact on the crypto industry, and the opinions of expert market analysts.
For the last two weeks, Uniswap and the entire crypto market at large have been stuck at a dip. This saw the altcoin shed more than 50% of its value and wiped most of the gains made in the last three months.
But is this the best time to buy Uniswap?
Most definitely it is a good time to buy Uniswap. Its past price performance has already proven that the token has an intrinsic value that will not be washed away.
The UNI altcoin has further shown that as soon as the external heat targeted at the crypto market dies down, it will be among the first altcoins to resume their winning ways.
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Why Should You Buy Uniswap?
The simplest answer to this is because Uniswap has performed exemplarily well since its launch and the promise of a relatively bright future.
Still not convinced, here are two more reasons why you should consider investing in Uniswap asset:
- Double rewards: After buying UNI tokens, you can also stake them in liquidity pools within the platform. This allows you to earn a share of the fees and commissions collected by the pool even as the altcoin value appreciates.
- Its position in the DeFi ecosystem: Uniswap is already considered the second-largest and the fastest-growing decentralized exchange within the DeFi ecosystem. Its growth in this niche will be driven not just by the continuous burgeoning of the DeFi purse but also by the need for privacy by future crypto traders.
Risks associated with Uniswap investments
The crypto investing niche is arguably one of the riskiest investments, particularly when you take into account the volatilities and unpredictable price movements. Apart from these, there are also are the unique risks facing Uniswap, including:
- Possible government crackdown: When global authorities realized they couldn’t tame the adoption of the peer-to-peer crypto technology, they turned to threats, restrictions against crypto traders and institutions, and even blanket bans on creation coins. Case in point China’s ban on Bitcoin transactions in the country and US congress’ stifling of Facebook’s Libra. The fact that Uniswap DEX facilitates anonymous crypto transactions paces it and the Eth blockchain at risk of censorship by the powers that be.
- Over-reliance on third-party crypto projects: Note that Uniswap is a DeFi protocol built on the Eth blockchain. Additionally, all the largest liquidity pools on Uniswap are ETH-denominated. This places Uniswap at a disadvantaged point, in that should anything happen to the Ethereum blockchain or ETH coins, it too endures collateral damage.
The key takeaway from this Uniswap investment guide is that the altcoin has proven to have an intrinsic value away from the hype.
The guide also paints for us a picture of Uniswap altcoin that is determined to steal the spotlight and cement its position among the best cryptocurrencies in the industry. As evidenced by the fact that it has edged closer to becoming among the top ten largest cryptocurrencies by market cap and the largest eth-based decentralized exchange.
That is all. And we hope it helps you make a more informed decision on whether to invest in Uniswap in 2021.
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