Uni Crypto: A Good Investment Option?

Investing in cryptocurrencies is risky due to the potential for high losses from security breaches. However, investing in crypto assets can be a good investment if done properly and as part of a diversified portfolio. Uniswap (UNI) is a decentralised exchange built on Ethereum's blockchain, allowing investors to swap cryptocurrency without needing an account with a centralised exchange. In 2021, Uniswap grew rapidly alongside the Decentralized Finance (DeFi) industry, and experts believe the UNI coin has plenty of growth ahead. However, as of 2022, Uniswap has cooled off. So, is Uniswap a good investment?

Uniswap's UNI token price history

Uniswap is a popular decentralised trading protocol, known for its role in facilitating the automated trading of decentralised finance (DeFi) tokens. It was founded by Ethereum developer Hayden Adams in 2018.

Uniswap's UNI token was introduced on 16 September 2020 through a retrospective airdrop to users who had previously interacted with the protocol. Each early user received a minimum of 400 UNI tokens, which were then worth around $800. UNI is an ERC-20 token, meaning it requires Ethereum to function.

The UNI token is unique in that it enables shared community governance in the growth and development of the Uniswap protocol. UNI token holders can contribute to overseeing the protocol and its wider ecosystem, in a trust-minimised way.

The UNI token initially increased in value to over $7, before correcting to below $5. In May 2021, it reached an all-time high of $42, but its price has been decreasing since then. By June 2022, its price had fallen to almost $4, and by September 2024, it was trading at around $6.80.

UNI's potential for growth

Recent Performance

In 2021, Uniswap witnessed significant growth, with a remarkable 300% return in a year. This surge indicates that the DeFi coin is likely to maintain its momentum in the upcoming months.

Version 3 Upgrade

The Version 3 upgrade is a significant boost for Uniswap, offering up to 4000 times capital efficiency compared to Version 2. This enhancement was implemented during Ethereum's mainnet launch on May 5, 2021, and it helps prevent slippage during transactions. The upgrade also incentivises users to become liquidity providers (LPs) by staking UNI, allowing them to reap more rewards through protocol fee sharing. This increase in liquidity providers will lead to higher volume on the exchange, potentially driving up the price of the UNI token.

Leadership in the Decentralised Exchange Space

Uniswap is currently the most popular decentralised application (DApp) on Ethereum and the twenty-third largest digital asset globally by market capitalisation. Its decentralised nature allows users to trade without any centralised authority, eliminating bureaucratic processes like Know Your Customer (KYC) verification. This has attracted a substantial user base, with over 117,751 traders in the last seven days and a 74.6% share of the decentralised exchange (DEX) space.

Analyst Projections

Several analysts and experts project a positive outlook for Uniswap's price growth. For instance, FX Leaders anticipate UNI to finish 2022 within the range of $25 to $45. Wallet Investor predicts a minimum price of $17.142, a maximum of $39.717, and an average of $28.352. Digital Coin Price estimates UNI to reach $26.09 by the end of 2022, representing potential gains of over 84%.

Competitive Advantage

Uniswap's position as a leader in the DEX space gives it a competitive advantage over other decentralised exchanges. Its innovative features, such as smart contracts and the elimination of intermediaries, have simplified trading activities and attracted a loyal user base.

Long-Term Growth Potential

While UNI's short-term growth prospects are promising, its long-term potential is even more impressive. Analysts predict that UNI could surpass its previous all-time high of around $44 and reach new milestones, such as $50, $100, or even $200.

In conclusion, UNI exhibits strong growth potential in the short and long term. Its performance, coupled with the upgrades and increasing popularity of the platform, make it a compelling investment opportunity for those interested in the decentralised finance industry.

UNI's status as a decentralised exchange

UNI is the native governance token of Uniswap, a decentralised exchange (DEX) built on the Ethereum blockchain. Unlike centralised exchanges (CEXs), which rely on an order book to match buyers with sellers, Uniswap operates as a DEX that leverages the Automated Market Maker (AMM) model. This means that users trade against a liquidity pool, which is a collection of funds deposited by other users.

Liquidity pools are at the core of Uniswap's AMM model. Liquidity providers (LPs) deposit cryptocurrencies into smart contracts and, in exchange, receive liquidity tokens representing their contribution to the pool. The price for each trade is determined algorithmically based on the ratio of the two assets in the pool.

Uniswap's AMM model is simple and permissionless, allowing anyone to swap tokens, contribute tokens to a pool, and earn fees, or list a token. There are no listing fees for tokens to be available for trade on Uniswap, which is a significant departure from most centralised crypto exchanges.

The UNI token is central to Uniswap's decentralised governance. Holders of UNI can vote on or propose changes to the Uniswap protocol, including changes to its code, fee structure, and future strategies. UNI tokens are also used to fund liquidity mining pools, grants, partnerships, and other growth-driven initiatives that expand Uniswap's usability and reach.

The introduction of UNI tokens in September 2020 was a significant event, with Uniswap giving out 400 UNI tokens to each cryptocurrency wallet that had ever interacted with its platform. At the time, the airdrop was worth about $800, and it made big news in the cryptocurrency industry.

As a decentralised exchange, Uniswap offers several advantages over traditional cryptocurrency exchanges. Investors who use Uniswap can swap cryptocurrencies directly from their Ethereum wallets, eliminating the need for the exchange to have custody of their funds. This significantly lowers the risk of being hacked, adding a layer of security that centralised exchanges cannot achieve. Moreover, investors don't need to create an account to use Uniswap, allowing them to trade cryptocurrencies anonymously.

The decentralised nature of Uniswap also means that no single entity controls the exchange, and no one can halt the trading of assets. This is in contrast to popular stock brokerages like Robinhood and WeBull, which halted trading of Gamestop (GME) after its recent price surge.

In summary, UNI's status as a decentralised exchange is a key feature of the Uniswap platform, offering benefits such as enhanced security, anonymity, and community-driven governance. The introduction of UNI tokens has further solidified Uniswap's position as a leader in the decentralised finance (DeFi) ecosystem.

UNI's safety and security

Security Features

As a decentralised exchange, Uniswap is a non-custodial network, meaning there are no intermediaries to oversee ownership of resources. Users retain custody of their digital assets and are solely responsible for managing their wallets and private keys.

Uniswap is built on Ethereum's blockchain, which still relies on the proof-of-work (POW) algorithm. This means a hacker would need more than 51% of the computational power to break into the system, which is practically impossible, making the decentralised application (DApp) secure as an ERC-20 token.

Risks

Investing in cryptocurrencies like UNI is risky due to the potential for high losses from security breaches. Cryptocurrency exchanges are vulnerable to hacking and other criminal activity, and investors have suffered sizable losses when their digital currencies have been stolen.

Safely storing cryptocurrencies can also be challenging. Many people don't like keeping their digital assets on exchanges as it means a company controls access to them. However, some of the alternatives, such as offline cold storage options, carry the risk of losing your private key, without which it is impossible to access your cryptocurrency.

There is also no guarantee that a crypto project you invest in will succeed, as thousands of blockchain projects are competing, and many are scams.

Safety Measures

Uniswap is regarded as one of the most secure ways to exchange cryptocurrencies. As it interacts directly with your Ethereum wallet, a hacker would need to breach your crypto wallet, which is harder than hacking an exchange. Since centralised exchanges hold custody of your cryptocurrency, they are much larger targets for hackers.

To keep their UNI tokens safe, users should be aware of scammers' tactics and only use the official Uniswap website and Twitter account. They should also never share their Secret Recovery Phrase or sync or validate their wallet with any websites or forms.

Regulation

Regulators may crack down on the crypto industry, especially if governments view cryptocurrencies as a threat. The Securities and Exchange Commission (SEC) has already filed enforcement lawsuits against several players in the sector. However, these suits should help establish long-term rules and regulations for owning and trading digital assets.

The increasing pace of crypto adoption is a sign of a maturing industry, and individual investors and companies are seeking to gain direct exposure to cryptocurrency, considering it safe enough to invest large sums.

How to invest in UNI

If you want to invest in UNI, you'll first need to sign up for an account with a crypto exchange that supports Uniswap. Two of the most popular options are eToro and Coinbase. Creating an account is usually a simple process – you'll just need to provide your email address and create a password. However, once you've made an account, you'll typically need to verify your identity. This usually involves providing a photo of your driver's license, as well as your Social Security number, home address and date of birth.

Once your account is set up, you'll need to deposit some funds. Different exchanges offer different payment options, but they often include bank transfers, credit and debit cards, and various online payment services.

With your account funded, you can navigate to the UNI page on your chosen exchange and purchase some coins. The transaction will then be processed, and the coins added to your account.

It's worth noting that there are other ways to invest in UNI beyond simply buying the coins on an exchange. For example, you can use the Uniswap exchange itself to invest in UNI tokens. To do this, you'll just need to connect your Ethereum wallet to the Uniswap website. The most popular Ethereum wallet for this purpose is Metamask, as its Google Chrome extension makes it easy to use with blockchain protocols like Uniswap.

Another option is to invest in UNI through an IRA (only available in the USA). At the time of writing, iTrust Capital offers this service.

Finally, it's important to remember that investing in cryptocurrencies like UNI is a risky proposition. The market is highly volatile, and you may lose some or all of the money you invest. It's generally wise to only invest what you can afford to lose.

Frequently asked questions