UNI, the governance token of Uniswap — the most widely utilized automated market maker (AMM) in DeFi — has surged significantly after Uniswap V3 was announcedon March 23. At just over $35 per token, UNI has gained nearly 23% in the past week
The Uniswap team said:
"Today, we are excited to present an overview of Uniswap v3. We are targeting an L1 Ethereum mainnet launch on May 5, with an L2 deployment on Optimism set to follow shortly after."
With a market capitalization of $17 billion, it has surpassed some major perennial altcoins such as Litecoin (LTC), putting UNI right under XRP whose market cap is over $25 billion.
Why are UNI and Uniswap seeing strong momentum?
There are two key reasons behind UNI's massive rally in the past two months.
First, Coinbase's planned initial public offering (IPO) in the U.S. market has caused the rerating of exchange tokens and AMMs.
Second, the overall increase in the interest in the DeFi sector has pushed up the valuation of major AMMs, including Uniswap and SushiSwap.
On March 21, the price of UNI reached a new all-time high at $35.2, fueled by the excitement surrounding Uniswap V3.
Analysts at Intotheblock said:
"Uniswap's governance token $UNI reached a new high of $35.2 with a lot of excitement building around the upcoming v3. In just 78 days of 2021, the protocol did $73.1b in traded volume and over $219m in fees. As well, the Total Value Locked reached a new ATH of $5.23b."
Investors and DeFi analysts say that the release of Uniswap V3, which essentially is the third version of Uniswap, will likely cause a DeFi and Uniswap "boom."
The pseudonymous investor known as "Johnny" wrote:
"In my opinion once $UNI v3 comes out and $ETH 2.0 comes out we will see a larger Uniswap boom than we saw in the summer. The plan is to starting planting your seeds now before it happens"
UNI is already a bluechip
UNI has become the go-to crypto asset to gain exposure to the DeFi market for many investors due to its dominance in the AMM market and high valuation.
Investors have long considered UNI as a bluechip asset, representing the exchange and AMM market within DeFi.
Alongside Compound, Aave and SushiSwap, Uniswap remains as one of the four major bluechip DeFi tokens.
Mike Abundo, a DeFi analyst and investor, said:
"Each Ethereum finance vertical seems to have a venture-driven blue chip and a community-driven blue chip. For lending, that's $COMP and $AAVE. For exchange, that's $UNI and $SUSHI. Wonder if we'll see similar dichotomies arise in Ethereum art and gaming verticals."
As long as the interest in DeFi and the total value locked (TVL) of all DeFi protocols continue to increase, the demand for UNI is expected to rise.
According to Dappradar, the TVL of the DeFi market has crossed $41 billion and has remained relatively stable above this level.
Out of the $41 billion, $4.75 billion comes from Uniswap, which means well over 10% of the entire DeFi market's TVL is in Uniswap.
Particularly as the Coinbase IPO nears, the momentum of UNI would likely accelerate, which would likely also positively affect SushiSwap, BNB, FTT, and other exchange-related crypto assets.