What's Driving Token Prices? October 18, 2023

Katie Talati
Oct 18, 2023

Join Katie Talati, Arca’s Head of Research, weekly on Wednesday at 4PM EST / 1PM PST as she shares notable token activity over the past week and her insights on what market events drove these token price movements.

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  • UNI (-4%) - The crypto world was rocked this week with an announcement from Uniswap Labs, the for-profit entity that focuses on development of the Uniswap protocol and its front-end. The Labs team announced that it would introduce a 0.15% fee on all trades conducted through its website and mobile app. The announcement has garnered a large amount of backlash since many were quick to point out that the equity portion of Uniswap’s business benefits greatly from this fee implementation at the expense of the UNI token holders. For years now, token holders have attempted to push forward a fee switch vote on Uniswap in order to add a fee to the trading protocol that could then be disbursed back to token holders. Several votes on the matter have failed due to “regulatory uncertainty” and “tax consequences”- issues that do not seem to be a problem for Uniswap Labs. Notably, the majority of UNI tokens are still controlled by early investors and team members. Some have speculated that the introduction of a trading fee is to provide revenue to Uniswap Labs, which is a venture funded entity with over 140 employees. Although the exact figures are unknown, we estimate if Uniswap Labs had introduced this fee 2 years ago they could have made up to $2.89B in revenue. Other estimates show far less trading activity flowing through the front-end and mobile app, with Uniswap only earning $33m YTD.
  • LDO (-3.4%) - Liquid staking protocol, Lido, has been facing the heat this past week with a spate of bad news. First, the protocol lost out for a grant of ARB tokens during the Arbitrum grant funding round which concluded last Thursday. Those against Lido’s proposal argued that it should not need additional incentives to support the growth of its already large ($13B+ TVL) protocol. Then on Monday, Lido officially announced that it will sunset support for Solana staking over the next 2-3 months. Continuing staking support on Solana has been up for debate in the past few weeks as the cost to maintain infrastructure was oustripping revenue. Finally, another governance proposal was published that also recommended winding down support for Polygon staking. While both of these staking services only comprise a small amount (less than 1% of total TVL) of the overall business, it greatly reduces Lido’s business lines, leaving it only supporting Ethereum staking.
  • FTM (-2%) - After the Multichain bridge hack led to an exodus of TVL from Layer-1 protocol, Fantom, a new hack further hurt its ecosystem this week. Yesterday, reports surfaced that Fantom Foundation wallets were exploited in a Google Chrome zero-day hack which drained about $550K from Foundation wallets and numerous other funds from a foundation employee’s personal wallets to the tune of $7m. Fantom is still actively investigating the issue.
  • XRP (+0.8%) - Gaming payment processor, Xsolla, and blockchain payment processor, Bitpay, announced the addition of RIpple’s XRP token as a payment method. Notably, Xsolla and BitPay service payments for Roblox, the popular web2 game creation platform. In Q1, Roblox reported $773M of in-game spending, which serves as an indication on the potential volume that could be done through XRP-  a faster, lower fee cryptoasset than BTC and ETH. The addition of XRP also signals that corporations are becoming more comfortable with Ripple following the positive ruling in its lawsuit against the SEC. 

DISCLAIMER: This commentary is not intended to be investment advice, investment research, or a recommendation. Please consult your investment professional for your own circumstances."

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Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional.

Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services.

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