Bearish for ETH: Unichain Launch Damages Ether’s Value, Experts Say

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As a seasoned DeFi researcher and educator with years of experience navigating the ever-evolving crypto landscape, I must admit that Uniswap’s (UNI) decision to launch its own blockchain network, Unichain, is a game-changer. While I have always admired Ethereum’s (ETH) resilience and adaptability, this move by one of the largest DeFi applications poses a significant challenge for ETH in 2024.

In simple terms, Uniswap (UNI), previously the largest decentralized exchange within the Ethereum Virtual Machine (EVM) ecosystem, has revealed plans for launching its own network, named Unichain. This move could significantly impact the tokenomics of ETH as Uniswap’s shift to a native protocol will introduce a new fee mechanism, potentially endangering ETH’s value because it operates differently from the current one.

ETH might be in danger as Uniswap launches its own chain: Expert

According to a Defi expert and educator named Wajahat Mughal, writing on platform X, Uniswap’s (UNI) move to introduce its own blockchain network, Unichain, could potentially weaken Ether (ETH) in 2024. This is because Uniswap can generate certain types of fees on the new chain, which may lead to a decrease in economic activity and network usage for Ethereum.

Unichain is another confirmation of $ETH being a bearish asset in 2024🩸Today we learnt news about @Uniswap’s next steps moving from not just the application layer, to now a rollup as part of the @Optimism superchain.Why would Uniswap want to be a chain?When transacting on… — Wajahat Mughal (@0xMughal) October 10, 2024

As a crypto investor, I’m excited about the prospect of Uniswap (UNI) transitioning to its own chain. This move will empower Uniswap to tap into two significant revenue sources: transaction fees (gas) and MEV fees. Given their potential, these income streams could prove substantial, though it’s still uncertain precisely how much activity will migrate from Ethereum (ETH) to the new blockchain.

From my perspective as a researcher, I anticipate that the level of activity on the Ethereum (ETH) network may decrease, which could influence the pace at which ETH tokens are burned. Furthermore, this situation might lead to a redirection of fees towards the Uniswap (UNI) team.

The anticipated transition of Uniswap (UNI) to its self-built blockchain could potentially challenge Ethereum’s (ETH) claims as a versatile asset in all aspects, an expert acknowledges.

If the top-earning DeFi app chooses to withdraw its income stream, this raises a thought-provoking question about Ethereum’s current position. A potential decrease in on-chain activity, gas prices (GWEI), and cash flow are noticeable effects, and it’s crucial to remember that ETH is not yet considered “ultrasound money.

Currently, Ethereum (ETH), the second-largest digital currency, is being traded for approximately $2,416. Over the past 24 hours, its value has increased by 0.56% on significant trading platforms.

Ethereum (ETH) needs new narratives to replace “Ultra Sound Money”

The story surrounding Ether, often referred to as “Ultra Sound Money” (a naturally deflationary asset post-EIP 1559 activation), is reportedly fading away.

Previously reported by U.Today, several experts have expressed concerns about Ethereum’s (ETH) sustainability due to its relatively low transaction volume on its main network.

More and more protocols moving from Ethereum’s L1 might form a “deadly spiral” for this metric. 

Starting from April 2024, there will be an increase in Ethereum’s (ETH) supply once more. From the second and third quarters of 2024, this digital asset experienced its longest inflationary phase since it transitioned to a Proof-of-Stake consensus mechanism in September 2022.

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2024-10-11 17:13