The cryptocurrency market crash this week was fairly extreme on market members. Nonetheless, regardless of this, Uniswap (UNI) noticed a possibility to spotlight why decentralized exchanges is likely to be the higher possibility.
Learn UNI’s worth prediction for 2023-2024
In a current Twitter put up, Uniswap famous that decentralized exchanges (DEXs) should not have central factors of failure, and identified this week’s black swan, FTX, for example.
Throughout FTX’s crash, it turned clear that Sam Bankman-Fried’s trade had main liquidity points. Consequently, there was a financial institution run on the trade as buyers rushed to tug out their funds.
1/ There aren’t any central factors of failure on DEXs. That’s by design.
Funds belong within the palms of customers and entry mustn’t come on the success or failures of centralized entities 🤝 https://t.co/HI57DjOzhM
— Uniswap Labs 🦄 (@Uniswap) November 9, 2022
FTX, because of this, halted withdrawals in a bid to regulate the scenario. DEXs are a superior possibility in that regard as a result of they encourage self-custody.
There have been a number of comparable incidents previously the place centralized exchanges halted withdrawals as effectively, thus placing merchants at a drawback.
Assessing Uniswap’s efficiency
The adoption of decentralized exchanges is certain to extend as such incidents pile up. Uniswap is among the many largest DEXs by way of quantity. The DEX registered an extra enhance in quantity over the past 4 weeks, which was fueled by the rise in lively addresses.
Supply: Glassnode
Regardless of this, DEXs even have their liquidity-related challenges. For instance, they see a rise in exit liquidity, particularly below tough market situations. This is identical factor that occurred final week, because of which its liquidity dropped by a considerable quantity.
Supply: Glassnode
So far as DeFi progress is anxious, Uniswap’s progress has largely been affected by market occasions. The demand for the platform dropped during times of low volatility, whereas it registered noteworthy progress during times of excessive volatility.
Supply: Santiment
The bearish market situations have triggered a rise in Uniswap’s utility. This confirms that a number of merchants desire utilizing the DEX. However does this type of demand impression the worth of Uniswap’s native token, UNI?
The natural demand for UNI does have an effect on its worth. Nonetheless, retail demand has the largest impression on the value, which implies by extension it will get affected by market occasions. This is the reason UNI crashed by roughly 38% this week.
Supply: TradingView
UNI remained above its June lows regardless of the robust pullback. This implies there was notably much less UNI promote stress than there was in the course of the earlier main crash. Maybe as a result of this time the crash didn’t have an effect on the liquidity swimming pools as a lot.
That is additionally a wholesome commentary for UNI’s capacity to recuperate rapidly. Its 14% restoration within the final 24 hours underscores the return of bullish demand after dipping into oversold territory.
