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Is Uniswap a Good Long-Term Investment? Pros and Cons, Explained

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Jul. 13 2021, Published 1:58 p.m. ET

If you’re new to the world of cryptocurrencies, learning each digital currencies can be dizzying. With how volatile crypto investing can be, choosing a solid investment is easier said than done. However, with a bit of research and studying experts’ analysis, you can narrow down a few reliable cryptocurrencies to invest in—not sure bets, but more stable projects. One of those is Uniswap (UNI).

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Uniswap, like many other cryptocurrencies, has had a relatively good year. Although UNI has been down recently, it might be a better investment than other cryptocurrencies. But before you throw all of your money into UNI, it’s best to understand the crypto and how it works so you know if it’s the right project for you to invest in.

What is Uniswap?

Uniswap is the most popular decentralized application (DAPP) on the Ethereum blockchain. Uniswap is the seventh-largest digital asset with a market capitalization of about $11 billion.

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what is uniswap
Source: istock

Uniswap is an automated liquidity provider that makes it easy to exchange Ether tokens. There isn't a centralized facilitator. Instead, tokens are exchanged through liquidity pools that are procured by smart contracts.

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Uniswap solves the problem of crypto exchanges absorbing too much power by creating a decentralized trading platform. It uses Ethereum’s blockchain to process these transactions. Many cryptocurrencies and NFTs utilize Ethereum’s blockchain and smart contract system. Smart contracts enable DAPPs to facilitate protocols on Ethereum’s blockchain, and Uniswap is one of those decentralized apps.

Uniswap is a group of smart contracts that work in sync as a decentralized crypto exchange. Because Uniswap works on the Ethereum blockchain, it has the same decentralized and global capabilities that cryptocurrencies have. Uniswap’s smart contracts are capable of transferring money autonomously and efficiently without governmental regulations and oversight.

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Is Uniswap a good investment?

At the beginning of 2021, UNI was trading at $5.17. However, UNI rode the same wave as every cryptocurrency through the first quarter and most of the second quarter and reached a peak of $45.02 in early May.

The recent market downturn didn’t spare Uniswap. While UNI is currently trading around $18 per token, it’s still over three times higher than it was at the beginning of the year. UNI has maintained similar trajectories as Ether, which is to be expected since Uniswap runs on the same blockchain.

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Uniswap as a long-term investment isn’t a bad strategy. Ethereum’s smart contract system provides it with a lot of utilization well into the future. As Ethereum takes off—especially after Ethereum 2.0 rolls out—its smart contracts will as well. Uniswap is poised to benefit from the same momentum as Ethereum.

However, the future of the cryptocurrency market still isn't clear. Some governments have embraced decentralized finance projects, while others have been taking a more hardline approach. With such mixed feelings from global powers, it’s difficult to say confidently whether certain cryptocurrencies like Uniswap are a good long-term investment.

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