- The UNI token may be overvalued based on the fee-to-market value ratio.
- Bot activity on the protocol increased as system flow toxicity increased.
Based on symbolic station Data, it was noted that UNI, the original Uniswap token, was trading at multiples of 16.20 times the annual fee that resulted.
Uniswap users pay about $420 million in trading fees annually, but the difference between the fees generated and the total market capitalization of UNI may indicate that the token is overvalued.
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The lower fees generated by Uniswap could have a significant impact on its growth as a platform. Fees are used to compensate liquidity providers for risk by providing liquidity to the exchange and maintaining market stability.
However, with lower fees, liquidity providers may not have the motivation to continue providing liquidity to the platform, resulting in a decrease in the total liquidity available on Uniswap.
The percentage of MVRV is increasing
Another sign to understand if UNI is overvalued is to look at the increased MVRV (Market Value to Realized Value) ratio. An increasing MVRV ratio indicates that the majority of UNI holders will make a profit if they decide to sell.
This may encourage holders to sell their holdings in UNI in the near future, which could lead to a drop in the value of the token.
In addition, the speed of UNI tokens has decreased in recent weeks, which indicates a decrease in the circulation of UNI.
Source: feeling
Too many bots
To reduce the difference between the market value of UNI and the fee generated by UNIswap, Uniswap will need to make improvements to its protocol.
One area where Uniswap could improve is to reduce the growing number of bot transactions on Uniswap DEX. At the time of publication, the number of bot transactions on the Uniswap network accounted for 48.2% of the total transaction volume. Well, these bots only made up 5.2% of the total network.
This trend can affect reliability as bot transactions can affect the accuracy of the prices of assets on the platform.
Source: Dune Analytics
Another area of concern for Uniswap is order flow toxicity – the way the platform’s order book is exploited to manipulate prices.
Read the UNI 2023-2024 price forecast
This may result in an unfair advantage for some traders and negatively affect the overall user experience of DEX. To address this issue, Uniswap can implement measures to monitor and prevent order flow toxicity on its platform.
Source: Dune Analytics
But Uniswap’s distribution is on osmosisA blockchain platform that provides solutions for DeFi can lead to fruitful collaboration and an improvement in the state of the protocol.
However, despite the signs of overvaluation, Uniswap still has the potential to improve and drive growth through partnerships and protocol upgrades.