Introduction
The recent surge in interest and trading activity surrounding Memecoins has had a significant impact on Uniswap, leading to a corresponding rise in gas prices. Our analysis has been divided into several key areas of interest:
- Memecoins Trading Statistics on Uniswap
- Memecoin’s Influence on Liquidity Dynamics
- User Growth Trends — Did Memecoin Craze Catalyze an Influx of New Users to Uniswap?
- Profiling Memecoin Traders — Who Are the Buyers?
- User & Liquidity Retention — Analyzing the Liquidity Flow of Memecoin Traders
To understand the influence of Memecoins on Uniswap, we aimed to identify what sparked the recent Memecoin mania and its effect on the Uniswap. This comprehensive analysis offers valuable insights into the driving force behind the recent Memecoins bull run and its implications for Uniswap.
Memecoins Trading Statistics on Uniswap
The Catalyst Behind the Memecoin Craze — $PEPE
In relation to other top Memecoins pools, namely $SHIB and $DOGE, it is noteworthy that $PEPE has achieved unparalleled dominance. Since its inception, $PEPE has consistently outperformed these pools, with a staggering average of over 80,000 daily swaps. This remarkable performance underscores the significant impact and appeal of $PEPE within the Memecoin market.
Furthermore, it is interesting to observe the emergence of the $LADYS pool after the peak of the $PEPE run. This development highlights the evolving market dynamics during this period, as new players entered the scene to capitalize on the Memecoins trend.
This influx of interest and liquidity by traders into the Memecoin narrative after the rise of $PEPE exemplifies the growing appeal and attraction of Meme-related tokens, as market participants strive to identify the next potential breakout similar to the notable success of $PEPE.
Hence, our focus primarily revolves around comprehending the impact and effects brought about by $PEPE, given its dominant position in the recent Memecoin mania.
$PEPE Volume vs Others
Notably, on the peak trading day of May 5, 2023, PEPE alone accounted for a staggering 25% of the daily trading volume on Uniswap. This highlights the significant role played by $PEPE during the recent Memecoin run on Uniswap
Memecoin’s Influence on Liquidity Dynamics
In order to analyze the impact of the recent Memecoin run on Uniswap, we conducted an in-depth examination of liquidity dynamics on Uniswap. Specifically, we focused on understanding how liquidity has evolved during this period in terms of various key factors:
i) Pair creation and liquidity action
There is an overall increasing trend in the creation of new pairs on Uniswap. During the Memecoin season, the creation of pairs related to Memes also experienced a surge, contributing over 20–40% to the total pool creation on Uniswap. However, after May 25, we observed a decrease in pool creation.
During the meme season, liquidity activity declined despite swaps reaching the year-to-date ATH during the peak of the meme season. This decrease can be attributed to the surge in gas prices, which made liquidity actions expensive to perform. Additionally, traders showed a preference for engaging in trading activities, focusing on finding the next memecoin with the potential for a 100x price increase.
ii) Changes in Uniswap v2 and v3 in terms of Total Value Locked (TVL)
During the peak trading volume period of PEPEs, we did not observe any changes in Total Value Locked (TVL). This could be attributed to the sudden surge in PEPE’s price, making it challenging for Uniswap users to capture the exact liquidity range necessary to earn fees. As a result, many users opted to engage in buying and selling activities with the hope of achieving substantial gains or avoiding impermanent losses, rather than actively contributing to the TVL.
This observation aligns with the decreasing liquidity action analysis as mentioned above. It is noteworthy that the primary focus during the meme coin season was on tradings and speculations, indicating that users were predominantly engaged in trading rather than actively participating in liquidity actions and contributing to changes in TVL.
iii) Memecoin Season effect on Uniswap’s DEX Dominance
This is obvious that the Memecoin season has strengthened Uniswap’s position within the decentralized exchange (DEX) landscape. The impact on transaction share is quite evident, with 95% of transactions now occurring on Uniswap following the peak of the Memecoin season. Uniswap v2 has played a crucial role in this, contributing significantly to the volume and transaction activity for Memecoins.
iv) Pool Type Dynamics on Uniswap
Prior to the Memecoin season, stable-volatile and stable-stable pairs dominated Uniswap. However, the Memecoin season brought about a significant shift. Now, there is a growing focus on volatile-volatile assets, and this trend appears to persist even after the decline of the Memecoin season. This may serve as an indicator of a bull market, as traders exhibit a greater willingness to take risks by trading or holding more volatile assets.
Memecoins are commonly associated with higher levels of volatility and speculative behavior. They have the potential to experience overnight gains of up to 10x-100x, which attracts traders who hope to capitalize on such rapid price increases.
These insights provide valuable information on how the Memecoin frenzy has impacted liquidity provision and trading activity. By analyzing user preferences, behavior, and overall market dynamics during the Memecoin mania period, we gain a clearer understanding of the significant impact it has had on the liquidity dynamics on Uniswap.
User Growth Trends
Before the start of the recent Memecoin season, marked by the $PEPE craze, Uniswap was witnessing an average daily user base of roughly 50,000. However, during the peak of the Memecoin season, the number of daily active users surged to 110,000, setting a new all-time high year-to-date in user engagement on Uniswap.
- It is worth noting that the increase in both new and retained users on Uniswap indicates the significant demand for meme coins. This trend highlights the growing interest and engagement of users within the meme coin market. By observing the rise in new user registrations as well as the sustained activity of existing users, we can assess the level of demand and popularity surrounding meme coins within the Uniswap ecosystem.
- The significant growth witnessed underscores the immense appeal of Memecoins, specifically $PEPE, as they hold the potential to significantly expand the user base on Uniswap.
This prompts a compelling question: who are the individuals behind the investments in $PEPE coins?
Profiling Memecoin Traders
In our examination of $PEPE traders, who have played a significant role in the recent Memecoin craze, several key observations can be noted:
i) The majority of $PEPE buyers are relatively new to Uniswap, with their trading history showing less than one week old,
ii) Number of DEXs traded = 1, primarily Uniswap.
iii) Notable portion of these buyers possess portfolios valued at $100 or less
iv) Additionally, our analysis has revealed the presence of both monthly and weekly traders who actively engage in DEX trading too.
These finding aligns with our observation that both new and retained users actively participate in Memecoin trading on Uniswap, with mostly retail traders and newcomers joining at the peak of the $PEPE run, which translates into the Memecoin craze later on.
The following analysis will examine whether these traders are here for the long run or just simply seeking short-term gains.
User Retention — Where are they now?
Interestingly, most Uniswap traders did not remain on-chain beyond the Memecoin season. From the balance of $PEPE on centralized exchanges (CEX), it is apparent that the influx was temporary and aligned with the rise and fall of the Memecoin craze.
Conclusion
- Uniswap is the preferred choice of decentralized exchanges (DEX) when new hot coins experience aggressive trading.
- Memes coins drive an increase in the creation of new pools on Uniswap.
- The liquidity action of hot Memecoins has a limited impact, as most traders engage in swapping rather than providing liquidity due to high gas fees.
- Memes coins contribute to strengthening Uniswap’s dominance in the DEX market, with Uniswap v2 playing a significant role.
- The high price volatility of Memecoins prompts Uniswap traders to shift towards trading more volatile-volatile pairs.
- The trading of new hot coins on Uniswap attracts both new and retained users, but the trend is not sustainable.
Reference
Dune:
https://dune.com/ahkek/memes-impact-on-uniswap
Defilamma:
https://defillama.com/protocol/uniswap-v3?events=false
TokenTerminal
https://tokenterminal.com/terminal/projects/uniswap
