Uniswap price falls to November 2022 lows despite burning $52 million worth of ETH in Q1

• Uniswap price fell below the $5 mark to trade at $4.9, falling to a six-month low.
• The decentralized exchange burnt the highest amount of ETH throughout Q1 and April, suggesting high usage.
• However, UNI price has been on a decline since February, regardless, owing to its correlation with Bitcoin.

Uniswap price has been in decline for more than three months now, extending its fall to the November 2022 lows. The Decentralized Exchange (DEX) token’s trading value is actively descending despite the DEX observing increasing usage. The reason behind this phenomenon goes back to the biggest cryptocurrency in the world, Bitcoin.

Uniswap price sees new lows

Uniswap price trading at $4.9 lost the psychological support level of $5, which was also the lowest point the altcoin fell to in the last six months. Marking a new low on May 24, UNI is currently inching closer to November 2022 lows of $4.8, which, if the cryptocurrency falls through, will bring it to a 12-month low.

UNI/USD 1-day chart

The reason this is concerning is that usually, the price decline has a lot to do with its investors. Either token holders tend to act bearishly and sell their holdings to offset their losses during bear markets or disappear from conducting transactions on-chain until the conditions get better.

But neither of the two situations happens to be the case for Uniswap. This is evident in the fact that the DEX has been observing increased activity since the beginning of the year. The month of April recorded the highest amount of ETH burnt in gas fees in comparison to other top protocols on the Ethereum chain.

The combined activity in the first quarter of the year on Uniswap resulted in the burning of over 29,333 ETH in gas, which amounts to more than $52 million. 

Uniswap ETH burn rate

A high burn rate is generally suggestive of high activity on the protocol, which Uniswap itself parades as an achievement.

This raises the question of why the price is still declining despite high activity, and the reason behind it is Bitcoin. The correlation that Uniswap price shares with BTC tends to impact the movement of the altcoin.

As Bitcoin price continues to trade below $27,000, UNI, with a correlation of 0.71, is following its bearish path to fall below $5. This correlation did not impact the altcoin in April however, when BTC was trending upwards. At that time, Uniswap price shared a negative correlation of -0.11, resulting in a failed recovery.

Uniswap correlation with Bitcoin

Thus as long as Bitcoin price stays bearish, Uniswap price might find it difficult to keep above November 2022 lows.

---