As the overwhelmingly successful cryptocurrency market continues to grow and develop, a vast range of tokens and solutions have emerged. One of these is Uniswap, a decentralised cryptocurrency exchange that runs on the leading Ethereum blockchain. Ethereum itself is already considered to be the second-largest cryptocurrency by market capitalisation. Uniswap offers a completely decentralised exchange, meaning that it can never be controlled by a central entity. The developers of Uniswap utilise a trading model, which they refer to as an automated liquidity protocol. This removes the need for any intermediaries in Uniswap token trading transactions and is implemented in a system of non-upgradeable smart contracts.
The Launch of Uniswap Trading
Launched in 2018, Uniswap crypto tokens are compatible with all ERC-20 tokens and infrastructure, meaning that wallet solutions such as MetaMask and MyEtherWallet are ideal for storing the token. Built on a foundation of transparency and community, Uniswap remains completely open-source, meaning that anyone can copy its code and create their own decentralised cryptocurrency exchanges. Users can list the tokens for free on Uniswap, and the exchange hosts a lively and committed community.
Uniswap also boasts its own proprietary cryptocurrency token, which is referred to as UNI. This is a governance token, which provides holders with the right to vote on new developments and changes to the Uniswap platform. This token is relatively new, having been minted in September 2020, but it is already considered a valuable part of the Uniswap ecosystem. In less than two years, the Uniswap coin and protocol have supported over $20 billion in volume, securing over $1 billion of liquidity. The developers of Uniswap argue that it is now extremely well-positioned for growth, development, and self-sustainability, thanks to its ethos of transparency and community.
Why Trade Uniswap as CFDs
While cryptocurrencies can be used as a medium of exchange like traditional currencies, they have also become extremely popular as an investment vehicle. The rapid increase in the value of many cryptocoins, including the market-leading Bitcoin, has led many institutional and private investors to invest heavily in the cryptocurrency niche. One way of doing this is via CFDs (Contract For Differences), a form of financial derivative which sees investors benefit from cash settlements between open and closing trade prices. Trading Uniswap via CFDs is highly beneficial, with several advantages over other forms of cryptocurrency trading:
- CFD contracts eliminate the need for a cryptocurrency wallet, ensuring there are no headaches related to the storage of currency.
- Leveraging is possible with CFD contracts, in which traders effectively borrow money to increase their trading profits.
- Autotrading is also possible with CFD contracts, which means traders can participate in the cryptocurrency market with Uniswap without needing to manually monitor their trading positions.
- Short selling is another feature of CFD trading, allowing traders to benefit regardless of the price direction of Uniswap.
None of these options exists on regular cryptocurrency exchanges, which is why trading with AvaTrade provides more trading opportunities and greater potential for profit.
What Influences the Uniswap Price?
There are a variety of issues that impact the price of Uniswap tokens, and these begin with the overarching market conditions. But many specific factors should be taken into consideration, as well. The pre-sale initial coin offering volumes and the mining process will have an impact on the ultimate price of the cryptocurrency, along with its price direction mechanisms. One billion UNI were minted at the genesis of the coin, and these will become accessible over the next four years. A perpetual annual inflation rate of 2% will apply once this 4-year period is over.
Uniswap is an automated liquidity protocol, which means that smart contracts are used to define liquidity pools and swap tokens. Prices are determined by the number of tokens in each pool, with the smart contract maintaining a constant via the x*y=k function (x = token0, y = token1, k = constant). Every time a trade is made, tokens are removed from the pool for an amount corresponding to the other token. Balances held by the smart contract are adjusted during the execution of the trade, which in turn impacts the price.
Recent developments in the price of the cryptocurrency and its market capitalisation will also have an influence, and the general direction of the cryptocurrency market will also be reflected in the price of Uniswap. Demand for tokens can result in the price of Uniswap and other cryptocurrencies increasing, as can the increasing popularity of crypto coins as a payment and investment medium. One thing to bear in mind with Uniswap, and the cryptocurrency niche in general, is that the volatility of their price and market capitalisation can be higher than that of commodities and equities. Often, this prompts cryptocurrency traders to hedge their investments.
Uniswap Coin Trading
There are many trading opportunities in the Uniswap crypto marketplace and the cryptocurrency niche in general. CFD contracts provide wider opportunities, offering investors more options to invest and trade on individual cryptocurrencies or gain broader market exposure via the top-10 cryptocurrencies index. AvaTrade also offers daily market analysis, an education centre, free demo accounts for new users, and multilingual support. The company has acquired a range of international regulatory certifications, and providing a secure environment for trading is our utmost priority. AvaTrade is an excellent place to begin trading Uniswap and other cryptocurrencies, so open an account now.
Frequently Asked Questions about Uniswap Trading
If Ethereum is dropping should I sell Uniswap too?
Since Uniswap is built on the Ethereum platform, the two are linked. Ethereum is an open-source platform for dApps, not just Uniswap. To better understand price movements with Uniswap, a clear understanding of DEXs is necessary. With Uniswap, there is no reliance on buyer/seller liquidity, since the Decentralized Exchanges can swap tokens freely. The Uniswap equation balances out prices. Movements in Ethereum tend to correlate strongly with price movements in other digital currencies on the platform. The 3-month correlation coefficient between Uniswap & Ethereum (May 2021) was 0.67. In essence, prices do tend to move together.
Do the decisions of regulators in the US and China negatively impact Uniswap trading, and if so how can I benefit?
The decisions of regulators in major cryptocurrency markets like the United States and China have a definite impact on pricing considerations. This is true for Bitcoin and altcoin across the board. The SEC classifies digital currencies as securities, while the CFTC classifies digital currencies as commodities. The more stringent the actions of regulators, the worse the effects on cryptocurrencies in general. In May 2021, Chinese regulatory agencies announced a major crackdown on cryptocurrencies. This sent the market into a tailspin, as hundreds of billions of dollars were wiped out. Uniswap trading trended strongly bearish, alongside major other cryptocurrencies.
Is it true that since 1 billion UNI were mined at the genesis stage, it’s unlikely that that Uniswap will ever trade at a really high value?
There is a widely held notion that if a billion tokens are released at the genesis stage, it is unlikely that the market price will rise too high. While it is improbable that UNI will spike as high as Bitcoin per token, since that would put the market capitalisation at hundreds of trillions of dollars, it is possible that UNI could rise to a substantial relative value. Provided demand exists and adoption is widespread it is entirely possible that bullish sentiment could drive up the price of UNI. Myriad other factors like regulation must be considered too.
See a trading opportunity?
Open an account now!