Base Boosts Uniswap Growth Amid UNI, TVL Challenges

In a Nutshell

Base, a layer-2 blockchain, has significantly contributed to the growth of Uniswap, marking a notable increase in monthly active traders on the platform. Despite this achievement, Uniswap faces challenges, including a declining Total Value Locked (TVL) and a dip in the price of its governance token, UNI. This scenario poses questions about the sustainability of Uniswap’s growth and the future trajectory of UNI’s value.

Base’s Impact on Uniswap’s Growth

Uniswap’s deployment on Base in August 2023 catalyzed an interaction boost with tokens built on the layer-2, demonstrating the immediate influence of Base on Uniswap’s ecosystem. This integration led to a significant increase in monthly active traders, which spiked by 55% towards the end of the second quarter (Q2), primarily attributed to the surge in transactions involving Base tokens, including meme coins like BRETT. Despite these milestones, the broader market conditions and a decrease in TVL suggest potential hurdles ahead for sustained growth.

Challenges Indicated by Declining TVL

The decline in Uniswap’s TVL, which fell by 11.68% to $5.58 billion as reported by DeFiLlama, raises concerns about market participants’ confidence in the protocol. A declining TVL usually indicates a withdrawal of liquidity, suggesting that investors might be questioning the yields that Uniswap can offer. Additionally, Base’s TVL also experienced a decrease, further complicating the outlook for Uniswap’s growth prospects.

UNI’s Price Outlook

The price of UNI has been impacted by these developments, trading at $9.12, which marks a 9.07% decrease. This downward price movement could be attributed to various factors, including market sentiment and the Network Growth metric. This metric, which tracks the number of new addresses making their first transaction on a network, has decreased to 109. A continued decline in this metric could signal a diminishing adoption rate for UNI, potentially leading to further price drops.

Our Take

While Base’s support has been instrumental in helping Uniswap cross significant milestones, the platform currently faces crucial challenges that could affect its trajectory. The dip in TVL and UNI’s price, coupled with uncertain market conditions, suggests that Uniswap may need to navigate these challenges carefully to sustain its growth. The future of UNI’s price will likely depend on Uniswap’s ability to attract sustained liquidity and new users, as well as the broader market dynamics influencing the cryptocurrency sector. For investors and traders, observing these developments and their impact on market sentiment will be key to making informed decisions about their involvement with UNI.

Sources

– Token Terminal
– DeFiLlama
– Santiment