Funds worth $1 billion, which were locked on Uniswap through an ETH yield farming initiative that launched together with UNI, will enter the DeFi market next week. Upon being unlocked, these tokens have the chance to radically move the market in either way. While one may believe that these ETH funds will be instantly sold on the market, others believe that investors will exchange them for Bitcoin, if not altcoins.
Back in September, the leading decentralized exchange Uniswap officially launched its governance model, together with a token. Likewise, the DEX created a yield farming opportunity that gave users the chance to earn UNI by providing liquidity.
Soon enough, the liquidity pool in question became one of the most highly-sought options in all of DeFi. The LP collected $2 billion in liquidity in only a few weeks, out of which Ethereum accounts for $1B. However, now that Uniswap is about to close the pool, these ETH funds will be unlocked and returned back to the market. According to Uniswap, the DEX will release these funds exactly on November 17.
Naturally, investors are worried about the effects of such an event. Will bearish traders sell the ETH on the open market? Will they use ETH to spark another wave of DeFi craze by purchasing altcoins? Or will traders turn 100% bullish and reinvest the ETH into Bitcoin? Bitcoin’s high price is making the market extremely uncertain, and in such a situation it is difficult to predict the next move. Nevertheless, we can still answer how each timeline could potentially play out.
Second DeFi wave
The world of decentralized finance has increased 10 times in size in only four months this year. Fueled by speculative ideas, users pushed DeFi from a valuation of $1 billion in June to $10 billion in September. The market has pushed for higher highs ever since September, but it has not increased in the same exponential manner as it has before.
Since no healthy retrace occurred, apart from a small one at the start of September, it is highly possible that the parabolic rise will repeat yet again. Now with the sudden release of a couple of billion dollars in ETH, there is a chance that users will utilize these funds to buy altcoins. In this case, the market would revive DeFi by fueling another wave of hype.
But how likely is this option? As Bitcoin sits around $16k, the highest it has been in years, we are inclined to believe that investors will rather stay risk-averse and not join DeFi at this moment. However, a real confirmation of bullish continuation on the monthly level could reassure investors and help them invest in DeFi tokens.
Uniswap ETH release will lead to a bearish market revival
Seeing that the market has reached the highest point it has in a long time, there is a real possibility for investors to hedge their positions and turn bearish. In this case, the $2 billion worth of Ethereum would be instantly exchanged for stablecoins. Such an event could prove itself to be detrimental for not only the altcoin ecosystem but Bitcoin as well.
Ethereum may still be lagging behind Bitcoin price-wise, but there has been no other moment in the market that has been an equally attractive selling point. Those who bought during the mini-bear winter of 2019 or even during the 2020 March crash may now look to realize their unrealized profits. If that happens, we expect no altcoin run as Bitcoin will most likely tumble with a gigantic reaction.
Altcoins silenced as the market keeps buying Bitcoin
While this may be another bearish situation for altcoins, it is completely bullish for Bitcoin. A possible timeline where investors utilize Ethereum to buy Bitcoin is not outside the realms of reality. If bulls are truly certain that this is the last time Bitcoin was ever under $10,000, they will stand with their ideals and resume buying. What may seem like a top for bears is just a local bottom for bulls.
On that account, we can also expect the market to fuel Bitcoin’s run in 2020 after Uniswap unlocks the ETH funds. This would prove itself to be the best option as it gives Bitcoin the opportunity to test its old ATH. Furthermore, it would offer a future time and place for the growth of all altcoins.