Uniswap’s narrow price action has led to the formation of a horizontal channel.
Its price is in an uptrend and is trying to break out of the upper line of the channel, which represents the support level.
However, the market sentiment is getting worse, putting the coin at risk of a downward correction.
The recent market rally has prompted Uniswap (UNI) to attempt to break out of the upper line of its horizontal channel.
However, as bearish forces dominate the market, the price of L2 tokens may return to support levels.
Uniswap witnesses low market activity
The general market consolidation over the past few weeks has caused the coin’s price to move in a tight range, forming a horizontal channel.
A horizontal channel is formed when the price of an asset trades continuously within a defined price range. UNI formed this channel on April 13, and since then its price has bounced between resistance at $8.35 and support at $6.73.
At press time, UNI is trading at $7.48, having bounced back to the upper line of the channel, which forms resistance. However, bearish activity abounds, which could force the price to reverse towards support.
UNI’s daily whale transactions have declined over the last month. For daily transactions worth more than $100,000, the count has dropped by 44%. For large transactions worth more than $1 million, the number of transactions completed per day has also dropped by more than 50% over the past 30 days.
Welcome to join us - how to layout, what varieties to layout, how to maximize the profit strategy, see the homepage click here 👉Follow the homepage
Uniswap whale transactions. Source: Santiment
When an asset experiences less activity, it may experience a drop in trading volume, reducing liquidity in its markets. This was demonstrated in the UNI markets over the last month, during which its daily trading volume dropped by 48%.
In addition to the decline in whale activity, UNI’s futures open interest has been trending downward over the last week. At press time, it stands at $76 million, down 5% over the past seven days.
Uniswap open interest. Source: Coinglass
UNI's futures open interest tracks the total number of open contracts, or positions, that have not yet been closed or settled. When it falls, it indicates that traders are exiting their positions without opening new ones.
UNI Price Prediction: Caught Between the Devil and the Red Sea
The bearish trend is confirmed by UNI’s Directional Movement Index (DMI) readings. At press time, the coin’s positive directional index (blue) is below the negative index (red).
When this indicator is set up in this way, selling pressure is significantly higher than buying momentum.
Furthermore, the altcoin’s relative strength index (RSI) is at 46.62, below the 50 neutral line. This also indicates market participants’ preference for UNI distribution.
Uniswap price analysis. Source: TradingView
This indicator measures the momentum of an asset's price changes. It ranges from 0 to 100, with values above 70 indicating overbought conditions and values below 30 indicating oversold conditions.
If the bearish pressure increases and UNI reverses the current trend, its price could drop to $7.06 and move towards the $6.73 support level.
Uniswap price analysis. Source: TradingView
However, if the buying momentum picks up and the coin continues to move towards the upper line of the horizontal channel, it might change hands at $7.5 before attempting a breakout above the resistance.
