November 13, 2020
By Sam Grant
In just four days, Uniswap’s first yield farming will come to an end and the community has gathered to discuss what will ensue
Uniswap’s initial yield farming opportunity will be coming to an end on November 17. Over the last few days, DeFi enthusiasts and industry analysts have raised concerns about what will happen then. The decentralised protocol has been running four different liquidity pools over the last seven weeks.
The pools have each been earning 583,333 UNI weekly. While the collateral injection of over $2.4 billion has driven Uniswap to be the largest decentralised exchange in terms of TVL(total value locked), its future hangs in the balance. As these incentives are about to end, there is a lot of uncertainty among holders.
Holders fear that there could be a looming token price dump in the short term should users move to pull out liquidity and sell off previously mined UNI. From a long-term perspective, the cutback in new UNI may favour prices.
Another worry is the future of the $1.1 billion worth of ETH in the pools.
“On 17th Nov, $UNI farming will end. Right now ~$2.3bn funds are deployed farming UNI, with $ETH being the reference token. This means that there is currently ~$1.1bn ETH locked up, about to be released into the wild. Where do you think that ETH will go?” DeFiance Capital’s Darryl Wang posted.
Wang believes that the $1.1 billion worth of ETH will exit Uniswap’s staking pools. The former investment banker argued that the capital from Uniswap farming will be moved in search of higher-earning incentives. Wang, now an investment analyst, suggested that the affected liquidity will be about $500 million in ETH and $500 million in WBTC and stablecoins.
It is worth noting that Ether rallied by 7% when UNI farming launched. There is therefore a likelihood of the opposite happening when it ends.
“Commercial farmers loaded up on ETH to capitalize on UNI rewards and when they end, it is likely these farmers will offload their ETH as well.”
Uniswap conducted a community call to discuss the very concerns among users. However, nothing concrete was arrived at as the call ended without a clear way forward. No proposals to extend farming or launch new pools were tabled. Being the case, it is advisable to buckle up as there could be a lot of volatility in the sector next week.
The community call was hosted by Monet Supply. Notable attendees that featured were Uniswap head of strategy Matteo Liebowitz, crypto podcaster Matt Aaron, and SushiSwap’s 0xMaki.