Uniswap spikes despite StarkNet; Avalanche in pursuit?

• With over 900,000 users, Uniswap registered its highest monthly increase since the year began.
• Avalanche and StarkNet followed suit, but Uniswap’s liquidity decreased.

May has proven to be a remarkable month for the Uniswap [UNI] protocol, as its monthly users grew from around 800,000 at the beginning to 969,466 as of this writing. The data, acquired from Token Terminal, revealed that this was the highest growth the Ethereum [ETH]-based Decentralized Exchange (DEX) has seen all year long.

Realistic or not, here’s UNI’s market cap in AVAX terms

Increasing participation and competition

For most of the first quarter (Q1), the project struggled to add over 100,000 users. In April, the growth of users was almost negligible. 

Source: Token Terminal

The surge in user numbers meant that there was an impressive rate of distinct addresses that transacted via the Uniswap network within the said period. In addition, Uniswap’s decentralized nature, support for ERC-20 tokens, and extensive token launch could have contributed to this hike.

Around the same May, Uniswap allowed traders to access several memes developed under the Ethereum blockchain. This increased participation in the DEX.

Despite witnessing a significant spike in the metric, the emergence of competing Layer Two (L2) networks like StarkNet has kept Uniswap on its toes. In the last 30 days, the number of users on the permissionless decentralized Zero Knowledge (ZK) rollup increased by 84.7%.

However, its user count only peaked at 764,320. For Layer One (L1) project Avalanche [AVAX], it was able to grow by 35.8%, thereby surpassing StarkNet’s count. 

In its own right, Avalanche has presented itself as a compelling alternative since it could connect to sidechains. Also, the project’s capability to link with L2 subnets could have also affected the rise.

Down on the count

Despite the increase in users, liquidity on the protocol mostly trended downward for most of the month. According to Glassnode, Uniswap’s liquidity at press time had decreased to $5.40 million.

Source: Glassnode

How much are 1,10,100 UNIs worth today?

Liquidity in crypto refers to the ease with which tokens can be swapped for other tokens via order books. High liquidity means that trading volume has increased, and it’s easier to fill orders in spite of numerous market participants.

But when the liquidity is low, like it is with Uniswap, it implies that it was difficult to buy and sell tokens on the DEX. As the month of May nears its end, the focus could again be on Uniswap. Will the protocol add to its growing user base, or will the last part of the quarter prove to be better? Only time will tell.