Uniswap (UNI): Analysis of 270% Price Surge & Future Potential

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Uniswap's price is almost four times higher than it was at the start of the year. What next?

Cryptocurrency prices have been on a rollercoaster ride in 2021, and the year's barely into its second half.

Uniswap (UNI) started the year at $5.17. According to CoinMarketCap data, it then climbed to a high of $44.97 on May 3 and is priced at $19.25 at the time of this writing. That's an increase of over 270% since Jan. 1, even factoring in the recent drop.

To put it in context, here's a look at how other coins have done so far this year:

Cryptocurrency Price on Jan. 1, 2021 Price as of this writing Percent increase SushiSwap (SUSHI) $2.86 $8.02 180% 1inch (1INCH) $1.37 $2.21 61% Bitcoin (BTC) $28,994.01 $39,784.31 37% Ethereum (ETH) $737.71 $2,330.52 216% Data source: CoinMarketCap.

Bitcoin and Ethereum are the biggest coins by market capitalization and have a huge influence on the market. SushiSwap and 1inch are key Uniswap competitors.

It should also be said that if you'd bought any of these at their highs, you'd be looking at overall losses rather than gains.

What does Uniswap do?

UNI is a governance token on the Uniswap decentralized exchange (DEX). Decentralized exchanges make it possible to buy and sell cryptocurrencies directly without intermediaries. In contrast, centralized cryptocurrency exchanges act as middlemen to facilitate trades.

The biggest issue DEXs face right now is the potential for increased regulation. DEXs are anonymous, so you don't need to provide any personal data to be able to trade -- once you've connected your wallet, you're ready to go.

Authorities worry that anonymous trading apps make it easier to launder money or finance terrorism. That's why most centralized exchanges require proof of identity before you can trade. It's also why the E.U. recently proposed a ban on anonymous trading services.

Uniswap is one of the few DEXs based in the U.S., and it looks like it's trying to stay on the right side of regulators.

For example, Uniswap recently announced it would cease trading certain tokens on its platform in response to what it called the "evolving regulatory landscape." The decision came after regulators met with decentralized exchanges, including Uniswap, last month to discuss concerns about certain cryptocurrency projects.

But we don't yet know what form increased U.S. regulation will take. Uniswap's move shows it wants to stay one step ahead of regulatory requirements. But restricting access to a few tokens is one thing. If it's required to verify traders' personal data, that could be a different story.

Should you buy?

Here are some questions to consider before you buy UNI.

Are you hoping for another 270% increase in the next six months?

Cryptocurrency investments are unpredictable, and we don't know how this market will unfold. As such, it isn't a great plan to invest in the hope of a big jump before the end of the year. It makes more sense to look for investments you think will perform well in the long term -- that way you don't have to worry as much about day-to-day price fluctuations.

Do you have solid emergency and retirement funds?

If you want to put money into cryptocurrency, make sure you've got your financial bases covered first. The first rule of crypto investing is to only spend money you can afford to lose. So before you buy any digital coins, it's a good idea to have three to six months' worth of living expenses set aside in your emergency fund. And to be up to date on your retirement contributions.

Do you understand DEXs and have you researched Uniswap?

The second rule of cryptocurrency is to do your own research. Read the whitepaper, look at the company leadership, and work to understand the competition. Before you buy UNI, you need to understand how DEXs work and the potential impact of new regulation -- and be comfortable with the way the company is run.

Do you have a plan to make your UNI work for you?

This is not essential, but if you're going to invest in Uniswap, think about how you might earn interest on your assets. For example, Uniswap uses something called liquidity pools to facilitate trading. Investors can earn a percentage of trading fees by contributing to those pools. But it isn't straightforward, so if you're interested, you'll want to do some research first.

Uniswap is one of the more established DEXs and currently benefits from being based in the U.S. It has performed better than its competitors this year, but there's also a chance it could be worse hit by changes to U.S. regulation. Put simply, there are a lot of factors to consider before buying UNI.

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