In today’s cryptocurrency market, Bitcoin’s performance is eye-catching, and the decentralized finance (DeFi) field seems to be facing a winter of challenges. Uniswap's token UNI has experienced violent price fluctuations in this context, and the market has increasingly questioned its value. However, Jeff Dorman, chief investment officer from New York investment management company Arca, expressed his opinion on social media that UNI's value is seriously undervalued, and this view deserves further discussion.
Uniswap’s market position
Uniswap’s leadership in the decentralized exchange (DEX) field is unquestionable. As Dorman pointed out, Uniswap’s market position is similar to Ethereum’s position in smart contract protocols. According to analysis by Dune Analytics, no protocol currently comes close to Uniswap in terms of transaction volume and market share. Despite the lack of market confidence in UNI, Uniswap has an average daily trading volume of $360 million, providing potential earnings for its token holders.
Source of value of UNI token: The true value of UNI token is not limited to its role as a governance token. Dorman emphasized that UNI is actually a “revenue pass-through” token, meaning it will provide an actual income stream to token holders. According to calculations, the annual fee income of the Uniswap protocol is expected to be $380 million, and after the fee conversion, UNI token holders will receive an annual income of $66 million. This dividend yield is as high as 13%, which makes UNI particularly attractive compared to the 1.7% dividend yield of the S&P 500 Index.
The prospect of fee switching
Fee conversion is a key part of the future development of UNI tokens. Dorman mentioned that the fee conversion time is almost certain to be February 26, 2021, which means that UNI will become a member of a list of tokens, such as HXRO, MKR, FTT, and BNB. This change will further increase the value of UNI tokens and attract more investor attention.
Reasons Against Owning UNI: Despite the potential of UNI, there are some reasons against owning UNI in the market. Here are some common opinions:
Sales pressure from liquidity mining: Some investors believe that the amount released by liquidity mining exceeds market demand, which may cause prices to fall. However, the actual daily amount released by UNI is 770,000, and value investors will be able to absorb these releases once the fee conversion is completed.
Doubts about Uniswap’s market position: Some people question whether Uniswap can maintain its market leadership, believing that its trading volume may decline. But in fact, Uniswap’s market adaptability and actual usage give it an advantage over the competition.
Doubts about fee switching: Some investors are skeptical about whether fee switching will happen or even know nothing about the concept. This short-sighted view may lead to missed investment opportunities in the future.
Waiting for the best time to buy: Some investors believe the fee switch will happen, but since there is still time, they choose to wait and see. This strategy can lead to missed opportunities.
Thoughts on DeFi as a whole: Some people believe that DeFi is no longer popular and therefore UNI should not be held. However, as a project with practical appeal, Uniswap’s potential cannot be underestimated.
Enlightenment from historical lessons
Investors can learn from history when considering UNI. Think back to Facebook's IPO in 2012, which was initially priced at $40 but fell below $20 after listing. Many investors are spooked by high valuations. However, smart investors will not bet against the market leaders, but will focus on projects that have actual use value.
in conclusion
The value of the UNI token is seriously undervalued, and the market’s misunderstanding of it mainly stems from the prejudice against its “governance” role. In fact, UNI is a potentially profitable token, and future fee conversions will further increase its value. In the DeFi industry, Uniswap is undoubtedly a project with practical use and market adaptability. Investors should focus on its potential rather than just chasing unproven future projects.
In the world of digital assets, the investment opportunities of UNI tokens cannot be ignored. As the market's awareness of its value gradually increases, UNI may become one of the most attractive investments in digital assets.