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The past week started with an inaccurate report on the SEC approving the iShare spot Bitcoin ETF in the U.S. Following this, Bitcoin surged above $30k. As BlackRock dispelled the rumors, Bitcoin fell sharply back to the $28k level. Despite this fiasco, the community is still expecting the approval of a Bitcoin spot ETF on the horizon as the SEC dropped its appeal against unfavorable court results in regard to its rejection of Grayscale’s Bitcoin ETF application.
The development around the largest DEX created some buzz this week, let’s take a deeper look into it.
UNI fell more than 10% in the past 2 weeks, lagging behind BTC’s two-week return of 5%. The two headwinds behind this are its announcement of a 0.15% swap fee and the detected KYC feature on its upcoming V4.
In particular, Uniswap has seen community backlash after announcing a 0.15% swap fee on selected higher-volume token pairs. The fees are expected to flow to Uniswap Labs for its continuous research and development activities. The newly imposed swap fee disappoints UNI token holders as they do not benefit from this initiative.
Before this announcement, Uniswap Labs had long been rumored to divert 0.05% out of existing 0.3% protocol fees to UNI holders. Despite this, it has yet to be materialized. It is unclear whether the newly added 0.15% swap fee will essentially replace the rumored 0.05% fee switch. The 0.05% fee switch might result in the exodus of liquidity providers, who might exit their liquidity if the liquidity provision on Uniswap makes them unprofitable.
As a short summary, fee burdens on the new users and the fact that no revenue is shared by UNI holders will continue to put pressure on the UNI token price. However, the fee burden criticism may be ungrounded.
Protocols | Swap fee |
Uniswap | 0.3% to LPs; Proposed 0.15% to Uniswap Labs (excl stablecoin pairs) |
Balancer | Variable swap fees The largest pool has a 1% swap fee, 17.5% to DAO, and 82.5% to staked BAL holders |
Curve | 0.04% to LPs |
Pancakeswap | 0.25% in total (0.17% to LPs; 0.0225% to DAO; 0.0575% to buy back CAKE) |
We look into the implementation of swap fees among top DEXes. It shall be highlighted that the proposed 0.15% swap fee by Uniswap is not an outlier as it is not remarkably higher than its peers and only levies on popular token pairs. The low swap fee on Curve is not comparable because Curve is popular for stablecoin trading, whereas Uniswap’s new initiative exempts stablecoin pairs. As such, the criticism that it adds to the user’s burden significantly may be ungrounded.
In our view, the lack of incentives for UNI holders is still the major headwind facing UNI’s token price.
UNI’s depressive token price may also be attributed to its weak trading volume as DeFi activities wane. Digging into the trading volume comparison with CEXes, DEXes have yet to see favorable inflow as the investors turn cautious toward CEXes following FTX’s and other CEXes’ collapse.