Uniswap (UNI) has rebounded above $6 as the bulls fiercely defended the $5.5 support zone in the past week. On-chain data suggests that Uniswap has benefited from the recent DeFi boom. Do the bulls have more in the tank? 

The industry-wide spike in Decentralized Finance (DeFi) trading activities appears to have driven up the demand for UNI. 

The introduction of the novel Concentrated Liquidity mechanism during its V3 product update has seen Uniswap consolidate its status as the largest crypto Automated Market Maker. On-chain data reveals that crypto investors appear to be accumulating UNI tokens as they intensify DeFi activities on the Uniswap trading platform.  

The supply of Uniswap tokens locked up in smart contracts has been on an uptrend since February, according to data compiled by Glassnode. 

The chart below shows how UNI holders locked up an additional 1.4 million tokens (0.24% of total UNI supply) in smart contracts between Feb. 2 and March 31. The additional UNI tokens locked up in the past month are worth approximately $8 million. 

When the supply of tokens locked in smart contracts increases, it temporarily reduces the number of tokens available to be traded on exchanges. The relative scarcity caused by the recent spike in DeFi activity could power UNI into further price gains.

Another critical on-chain metric corroborating this bullish stance is the decline in the supply of UNI tokens on exchanges.

Glassnode’s Balance on Exchange metric tracks the flow of tokens into exchanges when daily outflows are deducted. The chart below depicts how the UNI tokens in recognized exchange wallets declined persistently in the past month.

Since Feb. 26, UNI supply on exchanges has reduced from 41.4 million tokens to 37.6 million as of March 31. 

When the balance on exchanges declines for an extended period, it causes relative scarcity across exchanges which often triggers a price surge. Ultimately, UNI holders can expect a prolonged price rally if Uniswap traders and investors continue to move tokens off exchanges and lock them up in smart contracts.

IntoTheBlock’s Global In/Out of Money data shows that only 24% of Uniswap investors are currently in profitable positions. This could mean significant room for growth before most holders begin to take profits. 

As things stand, UNI will likely break its current resistance at $6.14, the maximum price that 34,000 addresses have purchased nearly 60 million tokens. If that happens, UNI could rally toward the next significant resistance at the $7.61 zone. Around this zone, another 34,000 addresses had bought 38 million UNI tokens. 

Yet, the bears can flip the narrative if UNI drops below $5.66, which is the minimum price that 34,000 addresses have purchased their 60 million tokens. 

If that happens, it could trigger a flurry of sell orders, pushing UNI further downward to the next significant support at $4.8. The $4.8 zone is the average price that 33,000 addresses had bought 20 million UNI tokens.

The post Uniswap (UNI) Bulls Defended the $5.50 Support, Now Can It Reach $7? appeared first on BeInCrypto.

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