Uniswap Price Forecast: Bull-Trap Ahead as Traders Liquidate $15M in 48-Hours

Uniswap (UNI) Price Analysis:

Uniswap price climbed 32% to a 90-day peak of $8.5 on Oct 10, to emerged to the top performer among top 20-ranked crypto assets, over the past week. Derivatives markets data shows short-term traders have started cutting down on their LONG UNI positions.

Will UNI price build on last week’s chart-topping performance or retrace into a consolidation phase  in the week ahead?

Uniswap Price Surged 32% on Layer-2 ‘Unichain’ Project Launch

Uniswap is the largest decentralized exchange platform. It’s UNI native token used to pay trading fees and participate in other vital services. The UNI price delivered a chart-topping 32.3% price gains, as it raced to the 8.5% mark on Oct 10.

Based on market reports, Uniswap’s 32% gains is linked to a well-received project launch. On Oct 10, Uniswap announced the launch of Unichain a new Layer-2 project with a premise to cut trading fees on the Ethereum blockchain by 95%.

The chart above shows how Uniswap active addresses had surged to a 3-month peak 1,670, on Oct 10, as network participants reacted positively to the latest updates.

“Unichain will be so fast, transactions will feel instant. It launches with 1 second block times, with 200-250 millisecond sub-block times coming soon. This type of speed isn’t just great for UX, it also improves market efficiency and lowers value lost to MEV.”

—  Uniswap Announces Unichain L2, Oct 10, 2024.

Markets reacted positively to this event within instant demand surge driving UNI price to $8.5 for the first time in 90-days dating back to July 16.

However, UNI failed to advance towards the $10 mark as many bull traders had anticipated. At the time of writing on Oct 13, UNI is trading at the 7.7% down 5.3% within the daily time frame, sparking signals of a potential bull trap ahead.

Trends observed in the UNI secondary markets also support this skittish stance.

Uniswap Traders Closed $15 million Contracts in 48-hours

After 32.4% gains last week, Uniswap traders now appear to be cutting back on their LONG UNI positions, in a bid to avoid a potential bull trap ahead.

Coinglass’ Open Interest chart below tracks the total value of unsettled futures contracts listed for a cryptocurrency, offering insights into real-time sentiment swings among short-term traders.

Uniswap open interest peaked at $139.58 million when prices hit a 90-d peak of ay $8.5 mark on Oct 10. But while price held up above $8, Uniswap traders began closing out their positions, bringing the active open interest below $125 million at the time of writing on Oct 13.

This $15 million reduction in futures contracts suggests waning confidence in the ongoing rally and hints at the possibility of an imminent correction.

When open interest declines during a price rally, it often indicates that traders are starting to take profits to hedge against a Uniswap price reversal. If it persists, the declining liquidity could set-off a knock-on effect where traders begin to take profits to avoid a bull-trap.

Within the current market dynamics, the UNI price rally is in jeopardy, as a close below the $7 support could trigger major stop-loss orders.

Uniswap Price Prediction: Bulls Must Hold $7 Support

Technically, Uniswap’s price is approaching a crucial juncture. The Bollinger Bands (BB) are tightening, indicating reduced volatility, and the Parabolic SAR is currently above the current price of $7.58, signaling bearish pressure. A failure to hold above the $7 support level could lead to a deeper retracement, with the next support levels around $6.50 and $6.35.

On the upside, a break above the $8.17 resistance, confirmed by increased buying pressure, could reignite bullish momentum, with $8.50 and $9.00 as potential targets. Traders will likely look for confirmation through volume and market sentiment as Uniswap navigates these key technical levels in the days ahead.

In summary, while Uniswap’s price surge following the Unichain launch is notable, the current market conditions suggest caution. The declining open interest, coupled with the price’s struggle to hold above $7, indicates the potential for a bull trap if support levels fail.