The logic behind UNI's sharp rise after launch
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The logic behind UNI's sharp rise after launch
Who is manipulating the price movements of UNI?
Navigating Web3 tides with focused insightsOn September 17 Beijing time, Uniswap announced an airdrop of 150 million governance tokens UNI, launching its "token giveaway" mode and instantly becoming the market's hottest topic. UNI debuted at $3.47 and surged to $7.82, marking a 125% gain within two days.
"You thought they gave you an iPhone 12, but after selling it, you realize they actually gave you a Tesla," lamented early recipients who sold their airdropped UNI tokens.
According to OKLink data, by noon on September 22, at least 186,698 Ethereum addresses had claimed Uniswap's UNI token rewards, totaling approximately 114 million UNI distributed. Based on on-chain transfer analysis, at least 34.23 million UNI have already flowed into exchanges such as Binance, Huobi, and OKEx.
Despite massive sell pressure from millions of airdropped tokens hitting the market in the first two days after launch, why did UNI rise instead of fall? What has been supporting UNI’s price?
Contrary to popular belief that retail investors were absorbing UNI supply in the secondary market, retail traders are not the main force driving UNI trading activity.
Etherscan data shows that Binance, Huobi, and OKEx rank beyond the top 10 holders of UNI, placing 12th, 18th, and 41st respectively. Even Binance, the largest exchange holder, holds only 2.25% of total supply.
Then who is driving UNI’s price movements?
On September 16, Uniswap officially announced the launch of its governance token UNI. In addition to the airdrop, users could earn UNI by providing liquidity to four designated pools (ETH/USDT, ETH/USDC, ETH/DAI, and ETH/WBTC). These staked assets are all major cryptocurrencies and stablecoins.
From September 16 to September 19—a span of three days—Uniswap’s total value locked (TVL) grew from $922 million to $2.138 billion, an increase of $1.216 billion. Of this growth, liquidity in the four UNI-mining pairs increased by $1.208 billion, accounting for 99.3% of the total new deposits.
In other words, the vast majority of new capital entering Uniswap was solely motivated by mining UNI.
UNI liquidity mining began at 12:00 UTC on September 18, while the UNI airdrop started two days earlier.
However, Uniswap changed the rules of DeFi: previously, most DeFi projects followed the pattern of mining on decentralized platforms followed by centralized exchanges (CEX) absorbing supply. But with UNI, a secondary market and valuation were established even before liquidity mining commenced.
The arbitrage window for miners was compressed to zero—miners themselves became the buyers taking on risk.
Many participants preparing for UNI liquidity mining adopted hedging strategies. Since free token distribution effectively amounts to shorting UNI, some miners mitigated downside risk by going long on UNI in the secondary market ahead of time.
After liquidity mining launched, if miners found that the returns from providing liquidity plus UNI rewards couldn't offset impermanent loss, they would choose to sell and exit.
According to CoinMarketCap data, current yields from liquidity mining on Uniswap have dropped below 50%.
"The lowest is only around 20%, just enough to cover losses," said one miner.
As UNI mining rewards normalize, miners are beginning to exit.
After September 19, UNI plunged sharply. At the time of writing, UNI had fallen 44% from its peak.
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