Why Uniswap TVL Data is Wrong and How it Affects UNI Price

Uniswap (UNI) is seem­ing­ly in the end of its short-term cor­rec­tion and is trad­ing inside a long-term sup­port area.

Token­ter­mi­nal tweet­ed a chart of the cumu­la­tive vol­ume for USDC pairs on Uniswap. While the vol­ume was vir­tu­al­ly zero in ear­ly 2020, it has been increas­ing sharply since May 2021. 

There has been an espe­cial­ly sharp increase in the USDC-WETH pair, which means that users are swap­ping their USDC sta­ble­coin to buy wrapped Ethereum (WETH).

The USDC-WETH band has been swelling at an espe­cial­ly sharp rate since Nov. 2021, like­ly in antic­i­pa­tion of the Ethereum Merge, which went live on Sept. 20.

How­ev­er, recent reports have come to light that shows the total val­ue locked (TVL) data is actu­al­ly not accu­rate. The main rea­son for this is that TVL cal­cu­la­tions do not account for swap fees. Each liq­uid­i­ty provider (LP) receives a 0.01 – 1% fee each time a trade is made, and it seems that TVL cal­cu­la­tions do not account for this fee, which can be claimed by LPs at any time.

For exam­ple, while Uniswap reports the ETH/USDC pool TVL at $320 mil­lion, the cor­rect val­ue is just $175 mil­lion. Uniswap relies on the decen­tral­ized blockchain index­ing ser­vice called The Graph. While its code is pub­licly avail­able, it seems that the TVL cal­cu­la­tions are amiss.

UNI breaks out

Despite this impor­tant mat­ter that has not been han­dled, the price of UNI has bro­ken out from a long-term descend­ing resis­tance line, which had pre­vi­ous­ly been in place since the May 2021 all-time high. The move­ment was also com­bined with a RSI break­out, increas­ing its legitimacy. 

How­ev­er, the price failed to sus­tain its increase and has near­ly returned to its pre-break­out lev­els. Cur­rent­ly, UNI is trad­ing inside the $5.30 hor­i­zon­tal sup­port area, and the week­ly RSI has failed to move above 50. 

The clos­est resis­tance area is at $14.30.

The short-term chart sug­gests that a sig­nif­i­cant bounce is expect­ed soon. The rea­son for this is that UNI Seems to have com­plet­ed a five-wave down­ward move­ment (black) or is very close to doing so. There is strong sup­port at $4.75, cre­at­ed by the 0.786 Fib retrace­ment sup­port lev­el and a hor­i­zon­tal sup­port area.

So, once UNI reach­es this lev­el, a con­sid­er­able bounce would be expect­ed. How­ev­er, the direc­tion of the long-term trend is still unclear. A week­ly close below the $5.30 area would like­ly take the price towards a new all-time low, while a bull­ish week­ly can­dle­stick could be the cat­a­lyst for an increase towards $15.30.

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