Uniswap (UNI) has dropped by 11% today, and trading volumes have increased significantly ahead of the release of the FOMC minutes.
The token has clearly entered a correction following a massive rally to nearly $11 driven by its second-best month on record in terms of fee collection.
The market’s response to the discussions that officials from within the Federal Reserve held before their latest interest rate decision could catalyze the next big move for the crypto market.
Currently, the odds of a rate hike in October dropped sharply to 22% following a cooler-than-expected PCE Price Index print in August.
However, we think that the usual sell-off that precedes any event associated with interest rates could push cryptocurrencies to lower price thresholds, as the market searches for the necessary liquidity to keep this bull market going.
Uniswap Sees 42% Jump in Active Users on the Robinhood Chain
It has been a bloody Wednesday for bulls, as long liquidations are nearing $600 million in the past 24 hours, the majority of which are coming from Ethereum (ETH). However, UNI bulls have booked their second-worst session in the past 90 days with $5.7 million in liquidations.
Turning to on-chain data, last month was the second best for Uniswap in terms of fees, as its launch on the Robinhood Chain continues to yield positive results for the project.
According to data from Token Terminal, active users jumped by 42.3% in the past 30 days, reaching 2.9 million. Meanwhile, protocol fees skyrocketed to $203 million in September, representing an 85% increase compared to the previous month.
We are not seeing the same level of activity in October, which may explain why UNI is tanking. Thus far in October, protocol fees stand at $25 million, resulting in a run rate of $125 million for the month.
If this is the final number for the period, that significant drop sets the stage for a massive correction for UNI in the near term.
Drop to $6 – $7 Seems Likely as Early Buyers Cash Out
Turning to the charts, the daily chart shows that a downtrend has formed following a strong rejection of a move above $10.
The price action hit what had been our near-term target for UNI and even neared our second target of $12 for the token. However, this strong selling pressure was expected as early buyers start to cash out of their long positions.
As we indicated in previous Uniswap price prediction articles, we see this pullback potentially pushing UNI below $7 in the near term. This would be the hottest buy zone for a late entry, as it was the area from which the token broke past its previous high.
A significant volume of buy orders should be sitting there, waiting for a healthy correction to jump on board. Momentum readings have already swung to bearish territory, as the Relative Strength Index (RSI) has dipped to 46.
The decline could accelerate during the week following the release of the FOMC minutes. However, we expect that, once the market finds and unlocks the liquidity trapped in these low price zones, the rally should explode back to the levels we saw recently.
