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UNI Mum as Uniswap V3 Announcement Leaves Bulls Wanting More

Key Uniswap Takeaways

  • Uniswap (UNI/USD) surged on Wednesday but lacked the momentum to turn the upside move into a price rally.
  • The move uphill appeared after the decentralized exchange unveiled a long-awaited network upgrade.
  • No hints on gas-solving layer-2 solution left bulls wanting more upside cues.

Uniswap climbed on Wednesday after the leading decentralized exchange team released details on its major upcoming protocol upgrade.

V3 Outlook

The latest published specifications showed that the “Uniswap V3” update would improve gas fee issues on the network. Uniswap consumes a majority of gas fees on the Ethereum network. Data fetched by ETH Gas Station shows that the exchanged charged $2 million worth of ETH for transactions in the past 30 days.

Uniswap’s new iteration aims to solve gas issues. However, the exchange won’t alleviate the problems until it launched its Layer 2 scaling solution, powered by a separate “Optimism” solution, which is also a part of the Uniswap v3 update.

The new revelations did not provide enough updates about when Uniswap would integrate Optimism into its protocol. But the exchange did state that it would introduce “concentrated liquidity,” a feature that would provide individual liquidity providers “granular control” over price areas for their allocated capital.

“Liquidity providers can provide liquidity with up to 4000x capital efficiency relative to Uniswap v2, earning higher returns on their capital,” the update read. “Even with these groundbreaking design improvements, the gas cost of v3 swaps on Ethereum mainnet is slightly cheaper than v2. Transactions made on the Optimism deployment will likely be significantly cheaper!”

UNI/USD Climbs Cautiously

The UNI/USD exchange rate jumped 1.48 percent to $31.47 after the Uniswap V3 announcement. Nevertheless, the pair’s volumes declined in the period of upside moves, showing a lack of bullish conviction among traders.

Uniswap, UNIUSD, UNIUSDT, UNIBTC, cryptocurrency, decentralized finance
Uniswap posts cautious gains after its v3 update. Source: UNIUSD on TradingView.com

Uniswap also faced downside pressure from its 50-4H simple moving average wave, which served as short-term resistance for the token. A break above the price ceiling posed the greater potential for UNI to reach the $35-36 price range as it attempts a full-fledged breakout out of its Ascending Triangle, a bullish continuation pattern.

Meanwhile, a failure to close above the 50-4HMA risked having Uniswap bears test the Triangle’s lower trendline for a downside breakout.

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Uniswap v3 announced for May 5, best DEX design on the planet?

The third iteration of the decentralized exchange Uniswap (v3) has a mainnet deployment date of May 5. The official announcement confirmed a highly anticipated feature, support for the second layer solution Optimism Rollups.

This feature will be enabled at a later date. The official announcement focuses on another “groundbreaking new feature” that the Uniswap Labs team has dubbed Concentrated Liquidity Positions. This will allow users to:

Rather than being required to allocate capital across the entire price spectrum from 0 to infinity, each LP is given full control over what price ranges they wish to provide liquidity to.

Another new feature is multiple fee tiers that will allow liquidity providers (LPs) to receive rewards relative to the amount of risk they take. The third iteration of the decentralized exchange will allow LPs to take advantage of “greater flexibility”.

This will have multiple direct implications for liquidity providers: they will be able to participate with up to 4,000 times more capital efficiency than in Uniswap v2 and earn fees by limit order, according to the official announcement. Therefore, they will receive higher returns, Uniswap Labs’ team said:

Capital efficiency paves the way for low-slippage trade execution that can surpass both centralized exchanges and stablecoin-focused AMMs.

Uniswap v3 introduces license to prevent forks

Researcher for cryptocurrency investment firm Paradigm, Dan Robinson, claimed that Uniswap v3 has the “best DEX (decentralized exchange) design on the planet”. Robinson believes the newly announced features put Uniswap above the competition.

He added that in the future other automated market makers could be built on top of Uniswap v3:

By combining multiple positions, LPs can approximate arbitrary curves. Any static curve can be implemented on Uniswap v3 and efficiently aggregated with the rest of its liquidity.

This includes custom formulas like the ones used by Balancer and Curve, as well as ones that don’t have elegant formulas. This means that most existing DEXes could be built on top of Uniswap, but it also vastly expands the design space to previously unimaginable AMMs.

The first iteration of Uniswap was launched in 2018, the second in May 2020. Since then, trading volume on the automated market maker has surpassed that of large crypto exchanges. As somehow of a trade-off, other projects have forked the DEX.

To prevent similar actions, the new iteration will be released with a Business Source License 1.1. In theory, this should prevent other projects from forking Uniswap’s v3 codebase. The license will last for 2 years, then a GPL 2.0 license will be adopted permanently.

However, the community can vote to speed up this process or give “exceptions”, Uniswap Labs stated:

We strongly believe decentralized financial infrastructure should ultimately be free, open-source software. At the same time, we think the Uniswap community should be the first to build an ecosystem around the Uniswap v3 Core codebase.

Governance token UNI is trading at $33.62 with losses of 2.7% on the 24-hour chart. On the one-week chart, UNI has posted gains of 12.6%.

Uniswap UNI
UNI’s performance still not reacting to Uniswap v3. Source: UNIUSD Tradingview
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Charted: Why Uniswap’s UNI Could Surge Above $35 and $40

Uniswap’s UNI is showing positive signs above $32.00 against the US Dollar. The price is likely to clear the $35.00 resistance and it could even rally towards the $40.00 level.

  • UNI is very stable above the $27.50 and $30.00 support levels against the US dollar.
  • The price is trading nicely above $32.00 and the 100 simple moving average (4-hours).
  • There is a key bullish trend line forming with support near $32.50 on the 4-hours chart of the UNI/USD pair (data source from Kraken).
  • The pair is likely to continue higher if it clears the $35.00 and $35.50 resistance levels in the near term.

Uniswap’s UNI Approaching Key Breakout

After a sharp downside correction towards the $27.50 support, UNI started a fresh increase. The last swing low was near $29.44 before the bulls pushed the price above the $30.00 resistance.

It broke the $31.00 and $32.00 resistance levels. There was a fresh test of the main $35.00 resistance. A high was formed near $35.13 before there was a minor decline. UNI dipped below the $33.50 level. There was a break below the 50% Fib retracement level of the upward move from the $29.44 low to $35.13 high.

Uniswap’s UNI

Source: UNIUSD on TradingView.com

It is now trading nicely above $32.00 and the 100 simple moving average (4-hours). The price is also stable above the 61.8% Fib retracement level of the upward move from the $29.44 low to $35.13 high.

Moreover, there is a key bullish trend line forming with support near $32.50 on the 4-hours chart of the UNI/USD pair. On the upside, the price is facing hurdles near $34.00. The main resistance is still near $35.00. A close above the $35.00 level could open the doors for a strong increase towards the $40.00 resistance zone.

Dips Supported?

If UNI price fails to climb above $34.00 or $35.00, it could correct lower. The first major support is near the $32.80 and $32.50 levels.

The main support is now forming near the $32.00 zone and the trend line. A downside break below the $32.00 support might open the doors for a push towards the $27.50 support. Any more losses may possibly lead the price towards the $27.50 zone.

Technical Indicators

4-Hours MACD – The MACD for UNI/USD is gaining momentum in the bullish zone.

4-Hours RSI (Relative Strength Index) – The RSI for UNI/USD is well above the 50 level.

Major Support Levels – $32.50, $32.00 and $30.00.

Major Resistance Levels – $34.00, $35.00 and $40.00.

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This FATF guidance could “wreak havoc” on Uniswap operators

International body Financial Action Task Fork (FATF) has issued new guidance for decentralized applications (DApps). Its implications could directly affect the DeFi sector and could have consequences for DApp “operators” such as Uniswap, Sushiswap, and others.

According to the agency’s definition and its standards, a DApp is software. However, the “entities involved” with the DApp can be Virtual Asset Service Providers (VASP). The guidance claims:

(…) a person that conducts business development for a DApp may be a VASP when they engage as a business in facilitating or conducting the activities previously described on behalf of another natural or legal person. The decentralization of any individual element of operations does not eliminate VASP coverage if the elements of any part of the VASP definition remain.

Attorney Gabriel Shapiro addressed potential consequences for the blockchain industry if the recommendations are implemented. Shapiro said:

Writing & deploying a smart contract (=free speech) is different from running a business with that smart contract (regulated).

Claiming that FATF recommendations could “wreak havoc” in venture finance and the blockchain industry if adopted, Shapiro added:

“a one-time sale of a VA makes you a money services business” thing has never made a lick of sense and seems inconsistent with FinCEN’s 2019 guidance.

Although FATF can only make recommendations or suggestions, these are internationally adopted by many regulators. Therefore, Shapiro believes they can have a real effect on the blockchain industry if u operators, i.e. Uniswap, are blacklisted by the body. Shapiro added:

I love DeFi and I’m very anti-KYC etc. But “repeal these laws just for DeFi because it makes people more free by providing plausible deniability” is not going to be persuasive to a person who believes the laws in question are good ones.

Member countries can apply sanctions, prohibitions and take other measures if the FATF suggests that any entity has “lost control” over compliance and money laundering prevention. Legal expert Stephen Palley said:

as some of us have been saying since the dawn of time, muh decentralization is apparently not yet a persuasive strategy to avoid AML/KYC obligations.

UNI on a 30-day rally

Data from Tradingview indicates that UNI has made significant gains (51.6%) over the last month. Currently, UNI is trading at $32.71. Although its performance in the last 24 hours is negative with losses of 1.3%.

Uniswap UNI
UNI with significant gains in the past month. Source: UNIUSD Tradingview

The good performance can be attributed to the release of Uniswap’s third iteration. Without a fixed deployment date, Uniswap v3 has caused great hype among its users. Uniswap inventor Hayden Adams is expected to provide details on the upgrade soon.