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Why The Closure of UNI Yield Farms is Bad For Uniswap

With just five days to go until closure, Uniswap yield farmers are getting jittery as there will be a lot of liquidity that needs to go somewhere.

Uniswap joined the DeFi farming frenzy on September 17 when it launched four Ethereum based liquidity pools for farmers to earn its native UNI token. In the weeks that followed, crypto collateral in ETH, wrapped Bitcoin, and stablecoins poured into these pools propelling the protocol to the top of the DeFi list in terms of total value locked.

in Ethereum will be ‘released’ in addition to a huge number of UNI which could be sold off.

Uniswap Community Call
The Uniswap community and staff members came together on Nov. 12 to conduct the protocol’s first community call to discuss what would happen when liquidity mining ends. Over a hundred industry experts and DeFi doyens joined, seeking answers.

Uniswap strategy head, Matteo Liebowitz, remained reserved refusing to answer questions on the concerns over a mass liquidity exodus. He said it was up to the community rather than the team, but with just a few days to go there is not enough time for Uniswap governance to make or pass a proposal for extensions or new liquidity incentives.

It has been noted that this scenario could be bad for Uniswap. Compound Finance founder, Robert Leshner commented;

“When incentives expire, liquidity in $DAI, $USDC, $USDT, and $WBTC will decline, and slippage (the cost of trading) will go up. This is bad for traders that use & adore the #1 DEX”

He recommended that the community maintains incentives for the following two pools: ETH/USDC and ETH/WBTC, adding that this reduces incentives by half, by narrowing them into the two most important pairs.

As it stands, over $2.4 billion in crypto collateral will be released next week, not to mention the surge in gas prices that is likely to occur when farmers pull their liquidity all at the same time.

UNI Price Outlook
At the time of press, UNI prices were up 4% on the day reaching $3.16. It is likely momentum is building ahead of the pool closure next Tuesday as UNI has made 43% over the past week.

This could be reversed, however, if there are no alternatives to earn on the previously mined tokens and they’re all sold off for short-term profits.

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