16. UNI Market Correlation

    Does the price of UNI correlate with the price of ETH? Compare this with the correlation of UNI to other DEX coins (such as AAVE, SUSHI, or anything else you find suitable)

    This dashboard aims to answer question 16: Does the price of UNI correlate with the price of ETH? Compare this with the correlation of UNI to other DEX coins.

    In this analysis, I choose SUSHI and CRV to compare. The observation time is the latest month (from 01-Mar-2022 to 31-Mar-2022)

    What is Uniswap?

    Uniswap is a software running on Ethereum that seeks to incentivize a global network of users to maintain an exchange where cryptocurrencies can be bought and sold by traders. 

    One of an emerging number of decentralized finance (DeFi) protocols, Uniswap leverages multiple crypto assets, including its native UNI cryptocurrency, to provide a service similar to a traditional exchange. The difference is Uniswap has no one central operator or administrator. 

    Rather than maintaining a central order book where buyers and sellers can place orders, Uniswap instead uses a collection of liquidity pools.

    Similar to protocols like Balancer and Curve, liquidity providers contribute to Uniswap pools by first locking two assets into a smart contract. For example, Uniswap’s DAI/ETH liquidity pool consists of equal values of DAI and ETH deposits. 

    What is Sushi?

    SushiSwap is a software running on Ethereum that seeks to incentivize a network of users to operate a platform where users can buy and sell crypto assets. 

    Similar to platforms like Uniswap and Balancer, SushiSwap uses a collection of liquidity pools to achieve this goal. Users first lock up assets into smart contracts, and traders then buy and sell cryptocurrencies from those pools, swapping out one token for another. 

    What is CRV?

    The Curve protocol is a fully decentralized platform controlled by Curve users, and hence governed by a decentralized autonomous organization (DAO). The CRV token is the “engine” behind the Curve protocol. As a governance token, CRV is crucial when it comes to making changes to the protocol, voting on improvements and earning profit via yield farming. 

    The liquidity pool functions with the provider designating DAI, USDT or USDC to a particular Curve pool and earning interest/gaining fees from the pool. There are numerous incentives to being a yield farmer on the pool, and farmers enjoy the passive income and ownership the Curve protocol offers.

    The line chart below indicates the correlation of UNI price to ETH and other DEX coins (SUSHI, CRV).

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    Based on the line chart, there is a similar trend in the price among UNI token, ETH token, SUSHI token and CRV token. In general, their price decreased and hit a lowest price on 7-Mar before recovering on 9-Mar. After a decline in the price of 03 tokens in the next 6 days, their prices went up significantly, which is understandable due to positive movements in the whole cryptocurrency market during this period. However, each token has different features, which will cause to different amplitudes of price change.