How will Uniswap’s rising DEX volume affect UNI? Analyzing…

• Uniswap witnessed a spike in LP fees due to high DEX volume.
• Network growth and price decline, velocity of UNI surged.

As investor trust in CEXs have declined, many users have moved on to DEXs, resulting in a surge in volume for the latter. Uniswap [UNI], one of the leading DEXs in the crypto space, has benefited immensely from this development.

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Reaping the benefits

One way through which Uniswap benefitted from the high DEX volume was through the spike in its LP (Liquidity Pool) fees. In March, Uniswap’s LPs earned $77 million in fees.

DEX trading is at a high right now which means so are rewards for LPs ✨

In March alone, Uniswap LPs earned $77M in fees. pic.twitter.com/XkFPkITJy2

— Uniswap Labs 🦄 (@Uniswap) April 7, 2023

However, this growth of the Uniswap protocol could be short-lived. According to Token Terminal’s data, the daily active users on the Uniswap protocol fell by 4% in the last month. Along with that, the treasury holdings of Uniswap diminished as well.

Source: token terminal

Another concerning factor for the protocol would be its progress in the NFT department. During the time of its release, Uniswap’s NFT marketplace saw tons of volume. However, with time, as its hype declined, the volume of NFT transactions on Uniswap plummeted from $120,000 to $15,000, per Dune Analytics.

However, these factors haven’t impacted Uniswap’s dominance in the DEX market. At press time, Uniswap had captured 63.5% of the overall DEX market share.

Source: Dune Analytics

How did UNI react?

However, Uniswap’s protocol dominance did not translate to the UNI token’s progress. According to Santiment’s data, the price of UNI fell considerably over the last few days. Coupled with that, UNI’s network growth also fell, implying that interest from new addresses in the token had waned.

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On the other hand, UNI’s velocity surged, indicating that the frequency with which UNI was being traded had increased.

Source: Santiment

These factors didn’t deter traders from being hopeful about UNI. According to Coinglass’ data, the number of short positions taken against UNI had decreased over the past few weeks.

Source: Coinglass