In September, Uniswap monthly volume rose to $15.3 billion, outstepping Coinbase. This is, however, a sign that DeFi has gathered strength and will continue to thrive in the market.
According to reports, the Uniswap decentralized exchange processed up to $15.371 billion in volume for the month of September. It is assumed that the recent DeFi craze is the propelling force behind the volume surge witnessed by Uniswap. To support such claims, data shows that $13.6 billion was processed by Coinbase.
Trade volume in September 2020:
— Mika Honkasalo (@mhonkasalo) October 3, 2020
Factors contributing to the volume surge in Uniswap
The explosive surge in Uniwap’s volume can be attributed to the intense spike in decentralized finance (DeFi). Also, yield farming of governance tokens has helped lead to the explosive rise of decentralized exchanges.
Another factor is the launching of Uniswap’s UNI governance token, which led to a DeFi craze on the platform. The month of June saw the start of a frenzy in DeFi governance tokens when Compound (COMP) token pioneered the sensation.
How Uniswap gained high volume
Uniswap gained more volume through their acceptance of governance tokens and the process is quite easy to understand. Users of the DeFi platform “farm” their new governance tokens when they stake various digital assets like Ethereum (ETH). When DeFi protocols release their underlying governance tokens, they do it in a decentralized manner so that the tokens can be distributed to users who want to stake.
As soon as users can farm their new tokens successfully, they still hold the token until they are able to sell them on centralized exchanges. However, the token’s market cap may be too small. The most notable crypto exchanges consider several factors before they list tokens. Such factors include developer activity, liquidity, and track record.
Unfortunately, DeFi-related cryptocurrencies and new governance tokens may not be able to meet the requirements. This made Uniswap gain relevance as a platform that trades DeFi tokens. So, as there is a surge in the total value locked in DeFi, it also resulted in the spike present in the trading volume of Uniswap.
Interestingly, the first time Uniswap outpaced Coinbase Pro in daily volume was on the 30th of August.
Responding to this, Hayden Adams, Uniswap creator, tweeted “hard to express how crazy this is.”
🦄 Uniswap: $426M
🏦 Coinbase: $348M
Hard to express with how crazy this is. pic.twitter.com/48o0xRkiUo
— Hayden Adams 🦄 (@haydenzadams) August 30, 2020
From that moment, Uniswap has consistently competed with Coinbase in their trading volume.
Recently, the Mask Network, along with Uniswap and CoinMarketCap, launched a trading widget. The new trading widget will allow Twitter users to trade ERC20 tokens without leaving the social media platform.
Also, Hong Kong-based cryptocurrency exchange, Bitfinex, announced the listing of UNI, the native token of Uniswap.