Uniswap is a protocol for swapping ERC20 tokens without the need for buyers and sellers to create demand.

The price of UNI has been trending downwards since the start of 2022.

1. How is UNI price correlated with trading volume?
2. Does this have an effect on the number of liquidity providers?

First of all, let's have a look at the average daily USD price of Uniswap.

Question and context

Evidently, the price of UNI has been trending downwards over the past months. But since 2022 is a very short time period at the time of this analysis (only 3 months), the scope of this dashboard will include 2 more months to evaluate correlations better.

Methodology

1. The analysis will mainly cover Uniswap v3 on Ethereum. A query about Uniswap v2 will be also provided for benchmarking purposes.

2. Trading volume would be defined with 2 metrics.

• daily amount in USD
• daily number of swaps

3. All the key metrics will be visualised in dynamic graphs that update once a day.
4. The SQL correlation command will quantify the relationship between UNI price with trading volume and liquidity providers.

The daily number of v2 swaps is strongly associated with the price of Uni. Both graphs have the same peak in November followed by a similar downward trend. Apparently, even though Uniswap is the same protocol, it has different trends with different chains (e.g. Ethereum,Polygon etc) or between version 2 & version 3.

V3 swaps have a very weak correlation with Uni price. Both the high and low points occur at different dates. Another parameter that could influence the number of Uni swaps on Ethereum is the dynamic gas fee, but we are not looking at that correlation here. Interestingly, Uniswap v3 swaps are less than Uniswap v2, even though it's the latest upgrade.

Daily volume measured in USD shows no correlation to the price of UNI over the past 4 months.

Conclusion

Once again, the number of liquidity providers does not seem to follow the current downward UNI price. In fact, the peak was recent on March 17, which shows that liquidity providers are increasing over time. Surprisingly, the price of UNI does not affect the number of liquidity providers!

1. No clear evidence that the UNI price is strongly correlated with the trading volume or the number of liquidity providers on Uniswap v3.
2. The number of swaps decreased during this price downward trend, but it could be caused by other external factors.
3. Further analysis is required to identify more discrepancies

• with other blockchains such as Polygon
• with Uniswap v2
• with a longer date range.