Uniswap Faces Correction Risk Despite Bull Trend; May Retrace to $4.9
Uniswap Faces Resistance at $6.6 – Should Traders Prepare for a Deep Retracement?
Uniswap, one of the leading decentralized exchanges (DEX) in the crypto space, has suffered a setback at $6.6. This raises the question of whether traders should prepare for a profound retracement.
Strong Performance, but Increased Selling Pressure
In the last month, Uniswap was able to record a strong performance. The bulls drove the gains within just forty days by 71.8% from $3.845 to $6.6. However, there has been a slight dent in the past few days and Uniswap was trading at $6.2 at the time of writing.
The daily price chart is healthily bullish. The rapid gains from $4.9 to $6, however, have left a large fair value gap that could be filled in the coming days or weeks. The Fibonacci retracement levels (pale yellow) agree with this idea. They indicate that a deeper pullback to the $4.9 level, which represents the 61.8% retracement level, could be expected.
Market Structure and Momentum
At the time of writing, the market structure and momentum were firmly on the side of buyers. The On-Balance Volume (OBV) was struggling to break through a local resistance, but the Chaikin Money Flow (CMF) indicated a strong capital flow into the Uniswap market. The indicators were bullish, but is the same true for the on-chain metrics?
On-Chain Metrics and MVRV Ratio
The average coin age experienced a major drop in mid-October. It began to recover later in the month and rose again, but did not reach the highs of September. This suggests that despite Uniswap’s price increase, accumulation in the network was weak.
On the other hand, the increase in active addresses could explain the increased demand for the token. The MVRV ratio was last at this value in July 2022. This means that increased selling pressure from holders realizing profits from their UNI holdings is very likely. This could lead to a deep correction.
Conclusion
Despite Uniswap’s strong performance in recent weeks, traders could prepare for a possible correction. The on-chain metrics and the MVRV ratio suggest a possible increased selling pressure. It remains to be seen whether the bulls will be able to absorb this pressure and continue the uptrend.
Sources: AMBCrypto, TradingView, Santiment
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