Why invest in Uniswap UNI? What are Uniswap investment pros and challenges? Here is everything you need to know about Uniswap investing.
A majority of crypto exchanges in the market today are centralized. This means that they are developed and controlled by a single entity, either an individual or a company. In this case, users have little control over the functionalities of these exchanges and even their own money.
The concept of decentralization is, in fact, associated with the cryptocurrencies traded or stored on these exchanges and not the exchanges themselves. That is why Uniswap, a decentralized exchange (DEX), brings an interesting disruption to the traditional order book system of trading.
Unlike centralized crypto exchanges like Binance and CoinBase, Uniswap does not rely on sellers and buyers to create demand or liquidity in order for trading to be efficient. Instead, the platform capitalizes on a new trading model known as automated liquidity protocol.
This Ultimate Guide on How to Invest in Uniswap will tell you everything you need to know - in plain English. This includes an explainer on what Uniswap is, how you can make money investing in Uniswap UNI, and crucially - how to make an investment today.
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How to Invest in Uniswap in 5 Easy Steps
To invest in Uniswap, the first step is to Open an accout with a regulated exchange, depost funds, select UNI from the platform list, and lastly check & confirm that coins have added to your Wallet.
Step 1: Open an account with a regulated broker or exchange
Step 2: Deposit some funds into your account
Step 3: Choose how much Uniswap coins you want to invest
Step 4: Confirm the investment
Step 5: Leave your Uniswap stored until you decide to cash out
- What is Uniswap?
- How Does Uniswap Work?
- Uniswap Price History
- Uniswap Price Predictions in 2021
- Different Ways to Invest in Uniswap
- Is Uniswap a Good Investment?
- Why Should I Invest in a Decentralized Exchange Like Uniswap?
- Conclusion: So, Should I Invest in Uniswap?
What is Uniswap?
Uniswap is a decentralized cryptocurrency exchange protocol (DEX). The protocol runs on Ethereum and is used as a medium for swapping ERC-20 tokens. Being decentralized, Uniswap is not owned or operated by a single entity.
Instead, it is open source meaning that anyone can use its underlying code to create their own similar exchanges. The platform allows its users to trade without using middlemen, as is the case with centralized exchanges.
This means that users can list their tokens for free without paying high fees. Users also have control of their funds which means they can’t lose them even if the exchange is hacked.
Uniswap was founded in 2018 by Hayden Adams. The developer was allegedly inspired to create the platform after reading a post by Ethereum founder Vitalik Buterin. It is now the world’s fourth-largest decentralized exchange, with more than $3 billion worth of digital assets currently being stored on the platform.
How Does Uniswap Work?
To clearly understand how Uniswap, we will first need to understand how centralized exchanges like CoinBase work. These exchanges facilitate trading using a traditional order book system. This is where buy and sell orders are listed on the platform, including the amount placed in each order.
To trade using the order book-based model, a buy order is matched with a sell order with the same price and vice versa. For instance, let’s say you want to sell one Ethereum token for $2,000 on CoinBase. After placing your offer, you will be matched with another user who is looking to buy that amount of ETH for the same price.
However, if Ethereum liquidity on CoinBase is low, most buy and sell orders may not be fulfilled using the order book model. That is why Uniswap uses a different model that does not rely on its users to create liquidity.
This model is a mathematical equation that automatically determines the value of tokens based on the current demand. You can easily add any token to the Uniswap protocol by funding it with the same value of Ether as the token being traded.
So, instead of Uniswap simply matching you with a buyer matching your instructions, it uses a constant equation where x * y = k. In this case, x and y represent the amount of Ether and the ERC-20 tokens currently active in a liquidity pool while k is s constant value.
Uniswap Price History
Uniswap is still a pretty young fourth-generation cryptocurrency with less than two years in the crypto market. For this reason, there is not that much price history to look back into.
However, we can still quickly brush over how the price has changed over the few years that the coin has been in the market. This should give you a good idea of whether Uniswap is worth investing in or you should consider alternatives.
We will be looking at the price of Uniswap from September 2020 to date, as shown in the graph below.
From the graph above, you can see that Uniswap has enjoyed an enviable bull run since when it was launched. From September to the end of 2020, it stabilized around the $3 point with subtle changes in either direction.
At the start of January 2021, the price jumped to $5, probably due to the market-wide bull run that came at the beginning of 2021. From here, it gained momentum, and by mid-January, it was already at around $9.8. This means the price tripled in less than three weeks.
Uniswap gained a lot of volatility in 2021 compared to 2020. For instance, between the 19th and 23rd of February 2021, UNI surged from $20.99 to slightly more than $30 and then, just as quickly, went back to $21.745.
Uniswap Price Predictions in 2021
Although UNI is currently trading at one of its all-time high prices, we expect that the price might go higher in the course of 2021. Judging from a number of expert predictions, Uniswap might more than double by the end of the year.
Wallet Investor gives an incredibly bullish prediction. The platform thinks the price of Uniswap could reach $76.2 by the end of 2021, with the possibility of going up to $83. Long Forecast gives an even more bullish prediction. The site believes that UNI will reach $95 before 2021 comes to an end.
This will be roughly triple the current price. Just like Wallet Investor’s prediction, there will be low volatility with the price only dropping in September and November.
This outlook indicates low levels of volatility throughout the year, with the Uniswap coin gaining about $20 after every two months. This will be pretty impressive growth considering that Uniswap hasn’t even hit $40 yet.
Both of these sites expect that Uniswap will be worth about $82 at some point in December 2021. The bullish predictions dont seem to end with Long Forecast and Wallet Investor, however.
Another price analyst, Italy-based Previsioni Bitcoin, predicts that Uniswap will be trading close to $100 by the end of 2021. In fact, according to the site, the price of UNI coin might reach $47 in May and grow steadily to around $97 by December 2021.
This is not much different from what Wallet Investor and Long Forecast is giving, considering that these predictions can be widely varying.
On the contrary, Trading Beasts doesn’t agree with the bullish trend for this year. The platform agrees that Uniswap will increase in value, but the growth will be slower than what the other three sites are predicting.
Overall, we get the picture that Uniswap will be on an uptrend this year, and by mid next year, the price might be significantly higher. This is a good signal that you might want to start investing now while the price is still low.
Check Out: Uniswap Price Predictions
Different Ways to Invest in Uniswap
After looking at the price history and current industry predictions, we believe that Uniswap deserves a spot in your investment portfolio. The Uniswap system uses its own token known as UNI, which acts as a governance protocol.
What this means is that users who hold UNI can vote on the changes such as network upgrades to the Uniswap system. This token was launched on September, 16th 2020, about two years after the creation of the Uniswap protocol. It is currently ranked the 33rd largest cryptocurrency in the world by market capitalization.
So, when we talk about investing in Uniswap, we mean the cryptocurrency UNI and not the protocol itself. The two names are often used interchangeably, just like you might use Ethereum to mean Ether or Ripple to mean XRP.
You can easily buy and sell the Uniswap UNI cryptocurrency the same way you would any ERC-20 token.
Consequently, there are different ways you can invest in Uniswap, but we are going to focus on three of the most common.
- Buying and Holding for the long-term
- Trading for the short-term
- Investing in Uniswap-related startups
Before we go through each of these methods, let’s look at how to open a Uniswap account and wallet. This is important because each of the methods above (especially the first two) will require you to have some tokens in your wallet before you can start trading or invest for the long term.
However, you won’t have to necessarily use the Uniswap exchange to buy UNI. You can still buy it from other centralized platforms like eToro. To do so, you will have to create an account then submit your buy order.
How to Invest in Uniswap
1. Open an Online Account
Opening an online account with most exchanges is fairly straightforward. Simply navigate to the platform you want to buy Uniswap from and follow the prompts to create a new account.
For instance, if you are using eToro, you can click on the Get Started button on the top navigation bar then fill in your information.
If you already have an account, you will simply have to sign in then submit your buy order.
After creating an account, you will also need to buy a wallet that you can use to store your UNI tokens after buying.
Let’s quickly learn how to do that.
2. Store your Uniswap UNI tokens
While you can still store your tokens on the platform you buy from, you will need a personal wallet to keep it safe.
We recommend that you invest in a cold wallet to ensure your UNI tokens are as safe as possible. A cold wallet is one that is not hosted online, for instance, a hard drive or software installed remotely on your computer or phone.
After buying a wallet, it is now time to make a trade.
3. Buy Uniswap UNI Tokens
First, make sure that your wallet is properly set up and ready to receive your new tokens.
Also, before buying, decide on the amount of UNI tokens you want to buy. Look at the market price and your personal budget and see how many you can afford. Remember not to invest more than you can afford to lose.
After deciding on the number of tokens you want, place your order. The way you place an order might vary depending on the brokerage exchange you use. For instance, some might need you to specify the type of order you want to place, i.e buy or sell order.
Next, relax and wait for the brokerage to complete your buy order based on the specifications you provided.
If the order cannot be filled immediately, it will be left open for some time, then closed at the end of the trading day. Otherwise, if the order is successful, it will reflect in your exchange wallet.
Now that you have your tokens ready, let’s go back to the different ways in which you can invest in Uniswap.
Method 1: Buy and Hold UNI Tokens
If you are not planning on trading your UNI tokens, we recommend that you transfer them to your cold wallet as soon as possible. This will help keep your investment safe in case of a cyber attack.
Buying and holding is a popular investment strategy not only for Uniswap but also other cryptocurrencies. Buying and holding (also known as hodling) is when you buy UNI tokens then store them in your wallet for a long time without selling. If you HODL UNI, it means that you don’t sell even if the prices are way higher than the purchasing price.
This is because you believe that the coin will some time see mainstream adoption and become highly valuable. We recommend this method for people who are not skilled in trading or don’t have the time to dedicate to active trading.
Otherwise, if you have the time and skills, trading might be a better suit for you.
Method 2: Trade Uniswap
Uniswap trading a great option if you don’t have the patience to wait for many years before you can reap the benefits of your investment. We recommend trading if you believe that taking advantage of the short term volatility is more profitable than holding for many years.
Trading is all about capitalizing on short-term price movements to make quick returns. There are two ways to trade: spot trading CFD trading.
Uniswap Spot trading is where you take advantage of short-term price bumps to make profits. In this type, you can only make money if the price goes up, and you must own some tokens.
However, with Uniswap CFD trading, you can benefit from both price directions (rise or fall) by simply predicting price direction. So, if you think the price will rise, you place a long position, and if you think it will fall, you place a short position. With CFD trading, you won’t have to buy any actual UNI tokens since you are only predicting price action.
This type of trading is, however, riskier, and we only recommend it for experienced traders.
Method 3: Invest in Uniswap Startups
If you don’t want to directly invest in Uniswap, you can still do so by investing in startups related to Uniswap instead of the coin itself. This is a great form of indirect investment because as Uniswap becomes more valuable, so will these startups.
And since Uniswap is decentralized (unlike other cryptocurrencies like Ripple), it becomes easy to invest in these startups since they don’t necessarily have any formal affiliations to the coin. So, in this case, you won’t have to trade or hold any UNI tokens to profit from its success,
Just identify a startup you think is best utilizing Uniswap to solve an existence problem, then put your money there. Make sure to do plenty of research and avoid companies that are not honest or are vague about what they are trying to achieve.
We, however, only recommend this for experienced investors who understand the market well. This is because investing in companies is a bit technical, and you may easily lose your money if you don’t understand how the market works and how to identify good companies to invest in.
Otherwise, if you dont feel confident or want the exhilaration of dealing directly with the cryptocurrency itself, you will be better off trading or holding.
Last year in September 2020, Uniswap rewarded its existing members with about 400 UNI tokens each as an airdrop. Back then, that was worth $800. About six months later, the airdrop is now worth $12,000. So, people who didnt sell off their free UNI tokens are now $11,200 richer.
That’s some nice free cash.
That story pretty much answers the question as to whether Uniswap is a good investment or not.
Now, imagine if someone had obtained some UNI tokens back in 2018 when the price was still insanely low. Theyd be reaping massive profits right now.
Uniswap has grown a lot over the past few years and is now a big part of the Decentralized Finance (DeFi ) industry. It is the biggest exchange on the Ethereum network and has attracted billions of dollars in investment.
Usually, people wouldn’t be rushing to invest in Uniswap if it wasn’t a good investment. Uniswap wouldn’t be such a big decentralized exchange if it wasn’t revolutionary. People have seen its value and understand that it’s headed for success.
So, if you are still in a dilemma about whether you should invest in Uniswap or not, maybe it is time to stop thinking. If you think the decentralized finance industry is the next big thing, Uniswap will definitely be a welcome addition to your portfolio.
The profits will, of course, vary depending on whether you are holding or trading for the short-term.
Why Should I Invest in a Decentralized Exchange Like Uniswap?
Decentralized exchanges have changed the way people handle their investments. Unlike traditional centralized crypto exchanges, DEX platforms like Uniswap allow investors to directly swap coins from their wallets. This way, the exchange doesn’t have custody or control over your funds.
As a result, you are much unlikely to be affected if the exchange is hacked. This makes decentralized exchanges way more secure than their centralized counterparts.
The best part is, you don’t even need to create an account in order to use Uniswap. So, you can trade your cryptocurrencies anonymously, something you can’t do with centralized exchanges like eToro or Coinbase.
The decentralization of Uniswap also means that it is not controlled by any single entity. This gives investors a lot of freedom, especially when it comes to choosing what tokens to list and invest in.
Remember that centralized exchanges have control over your funds while you release them to their platform. This makes Uniswap much more aligned to the whole idea of cryptocurrency decentralization even though it is an exchange.
Conclusion: So, Should I Invest in Uniswap?
Like any other cryptocurrency, Uniswap is a highly volatile asset. So, while there is generally a positive outlook for the years ahead, we might also see a steep drop. Whether or not you are willing to invest in Uniswap depends on how much you are willing to risk.
Most investments come down to the risk vs reward factor. In other words, do the potential rewards outweigh the possible consequences of the risks?
The price of Uniswap is still much lower than the major cryptocurrencies like Bitcoin and Ethereum. This makes it a great option if you are just starting out and don’t have a lot to spend. It is incredible how much Uniswap has grown in a span of two years.
Put simply, Uniswap is low-risk investment with lots of potential rewards. It’s something you should definitely do some research before you consider adding it to your portfolio.
As usual, we recommend doing your own research and working with someone who understands this kind of investment well. Otherwise, from what we can see from the price history and predictions, Uniswap might just be an ideal digital asset to invest in right now.
In the next two or three years, we might see a huge surge and insane profits for people who are investing in Uniswap now. So, depending on whether you like to trade or hold, experts are positive that Uniswap could be a profitable addition to your portfolio.
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