Uniswap Liquidity Dumps 43% After UNI Distribution Ceases

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  • Liquidity on the Uniswap platform has dumped 43% today
  • The dump is due to the expiry of the liquidity provider program without a new one being voted in
  • Uniswap is stabilizing after its post-summer usage binge

Liquidity on the Uniswap exchange has dumped by 43% following the conclusion of its UNI token liquidity rewards scheme. Uniswap, which was the place to be from June to September if you wanted three-figure returns, has been suffering of late, with trading volume 66% off its September high as the yield farming craze peters out. The platform is now under further pressure, with the Total Value Locked (TVL) on the platform down 43% in one day, as users pull out funds following the cessation of UNI distribution to the platform’s liquidity pools.

Proposal Vote Delay Causes Dump

Uniswap’s liquidity problems have emerged due to the timing of a crucial proposal vote. With the existing UNI reward system expiring today, it was anticipated that a new proposal would be ratified prior to this date in order to avoid a liquidity exodus. However, no substitute proposal has been forthcoming, leading to users pulling their ETH off the Uniswap platform now they are no longer rewarded for doing so.

This has led to a sharp drop in the previously stable liquidity balance on the exchange:

uniswap defi pulse

Source: DeFi Pulse

A proposal was belatedly put forward by Cooper Turley Audius which would see Uniswap undergo its own halving – 1.25 million UNI tokens would be designated to each pool every monthly for the next two months as opposed to 2.5 million in the former program.

Users get to vote on the proposals, with 25,000 UNI tokens required to get the proposal through to the next stage – a consensus check. Were the proposal to be ratified and implemented it would no doubt draw some liquidity providers back to the platform, although not in the numbers Uniswap was initially experiencing.

If the new proposal isn’t ratified then a new one will have to be tabled and voted on, with these delays further degrading the liquidity on the exchange, although not to critical levels yet.

Uniswap Finding its Feet After Enormous Summer

Uniswap has endured a difficult past few weeks as attention has turned to Bitcoin, with volume 66% off its September high (excluding the November Harvest Finance hack):

uniswap volume

However, the trading volume has now stabilized after its mammoth run, suggesting that the platform has finally found its level, although it has lost top spot to Maker in the DeFi protocol market dominance rankings.