The Dog and the Unicorn: Dogecoin and Uniswap Through a Trader’s LensRecently HYCM, an established forex broker, added new CFDs for Dogecoin (DOGE) and Uniswap (UNI). What does a meme-turned-money have in common with a crucial piece of crypto infrastructure? And why is HYCM keen to offer its traders access to both? Read on.
Launched in 2018, Uniswap is a decentralised exchange built on the Ethereum blockchain. It’s a vital piece of Ethereum’s decentralised finance (DeFi) infrastructure, allowing Ethereum address holders to swap between any Ethereum-based crypto token almost instantly. Rather than the order books of traditional exchanges, Uniswap facilitates trades between different crypto assets through the use of liquidity pools that are created by users of the network. Uniswap is currently the world’s largest decentralised exchange and one of the top crypto exchanges by daily volume across the board.
Dogecoin is an older cryptocurrency that dates back to 2013. It’s based on the technology behind Litecoin (LTC) and, depending on who you ask, was either originally created to poke fun at the cryptocurrency space as a whole, particularly Bitcoin, or as an attempt to bring a much wider demographic of users into the space. Seeing as the coin has been quite successful on both fronts, the truth has somehow been lost in crypto history.
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Dogecoin’s supply dynamics are radically different to Bitcoin’s. Dogecoin initially started with a 100 million hard cap, but when the last of these 100 million coins was mined back in 2015, the supply schedule was altered to allow for a further 5 billion coins to be mined each year. There is no current hard cap on dogecoin’s supply.
Technicals vs. Fundamentals
Now, from the perspective of any investor interested in fundamentals, Uniswap would seem to be the better bet. It is newer technology, built on the largest smart contract platform in the world and backed by some serious names like Andreessen Horowitz and Union Square Ventures LLC. Furthermore, it’s a systemic lynchpin in the crypto economy with an important and ground-breaking function. Below you’ll find a weekly chart of UNIUSD, not the healthiest chart in the world at the moment. It actually looks as though it may be preparing to rollover at the time of writing.
Year-to-date Uniswap is up around 200%. Dogecoin, however, is up around 2400%. Measuring from the recent market top in May, Uniswap is down some 64% to dogecoin’s 75%. All this is to say that focusing on fundamentals to the exclusion of price action at this particular point in the market cycle would have caused your portfolio to underperform.
And, if we learned anything this year throughout the WallStreetBets debacle, it’s not just about price action; sometimes the story is more powerful than anything else, particularly in the midst of a rather frothy bull market that has exceeded all expectations. Below you’ll find a weekly chart of DOGEUSD. I’m sure you’ll agree, despite there being almost no fundamental reason to hold doge over other crypto assets, it looks like a much healthier chart that appears to be getting ready to set a higher-low and make a new move higher. The chart is actually reminiscent of Ethereum’s price action in the early stages of the 2017 bull market.
Non-traders often find it hard to separate the asset from the price action. In other words, they can fall into the trap of paying too much attention to fundamentals at times when price action dictates almost everything. The performance of GameStop and other ticker symbols favoured by the WallStreetBets community this past year is a perfect example of this phenomenon. So, while rational onlookers shake their heads from the sidelines, the price action continues to offer the possibility for truly fantastic returns.
It happened with Tesla, long before the post-COVID trading bonanza we’ve seen, it happened with meme stocks, and it also happened with doge. It’s not just conservative traditional investors who are shaking their heads. Many crypto investors have also been sitting on the sidelines observing as the dogecoin meme massively outperforms their own thoroughly researched portfolio of crypto projects.
From a purely trading perspective, though, it’s important to remember that these symbols are just vehicles for accumulating more of your native currency; nothing more, nothing less. The best traders are able to separate their own beliefs and allegiances from what is actually driving markets and take positions that they would never dream of taking with their investor hat on.
How long will it last? That’s anyone’s guess. The point is that at this juncture the narrative is everything, and the power of retail investors to move markets by investing en masse in certain stories has been confirmed time and again this year. In a different kind of market, or even at a longer timeframe, the two charts presented above may look radically different. This is also why we want to make sure that our traders can access the most appropriate assets in any type of market.
As a global forex broker, HYCM has always offered a large range of products adapting quickly to respond to market trends and providing traders with the most in-demand instruments. In addition to cryptocurrency CFDs, HYCM offers forex, stocks, indices, commodities and ETFs with excellent trading conditions: fast execution and low spreads. The broker supports its traders every step of the way, providing regular insights on its blog, HYCM Lab, and hosting free online webinars and practical workshops. As an enduring and regulated broker, traders can rely on HYCM to provide both security and transparency.
by Giles Coghlan, Chief Currency Analyst, HYCM
Note: Cryptocurrencies and ETFs are not available for trading under HYCM (Europe) Ltd and Henyep Capital Markets (UK) Ltd.
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