Uniswap governance revolution ignited! The deflationary mechanism is activated, with a target price of $7.20 for UNI.

On November 12, Uniswap’s native decentralized exchange token UNI temporarily reported $8.52, up 1.5% for the day. Earlier this week, the price reached a monthly high of $10.2. The rally followed the Uniswap Foundation’s submission of the “UNIfication” governance proposal on Monday, which will activate protocol fees and retroactively burn UNI tokens valued at $842 million.

UNIfication Proposal Sparks Fee Conversion Revolution

(Source: Uniswap)

The proposal was jointly drafted by protocol founder Hayden Adams, Uniswap Foundation Executive Director Devin Walsh, and Uniswap researcher Kenneth Ng. It aims to reduce the supply of UNI by initiating a burn mechanism. If approved, this would mark a significant shift for Uniswap and its token holders, as they have been advocating for a so-called “fee conversion,” transferring a portion of trading fees historically allocated to liquidity providers into the Uniswap protocol treasury or UNI holders.

Uniswap’s 0.3% trading fee will be split into two parts: 0.25% paid to liquidity providers and 0.05% allocated to the protocol itself. The protocol will use all collected fees to buy back and burn UNI tokens, creating a deflationary effect on the token supply. This mechanism is similar to stock buybacks but more aggressive, as burned tokens are permanently removed from circulation rather than just held as treasury stock.

This feature will burn 100 million UNI tokens from the reserve. This retroactive expenditure, worth $842 million, includes fees that would have accumulated since the protocol’s inception. This supply shock could potentially boost UNI’s price by limiting supply and increasing scarcity. According to basic economic principles, decreasing supply with demand unchanged typically leads to higher prices.

Core Elements of the UNIfication Proposal

Protocol Fee Activation: 0.05% of trading fees go to the protocol for buybacks and burns

Immediate Burn: 100 million treasury UNI tokens burned at once, worth $842 million

Deflationary Mechanism: Ongoing use of protocol fees for buybacks and burns to establish a long-term deflation model

Fee Structure Adjustment: Prohibit Uniswap Labs from charging fees via interface, wallet, and API

Governance Transformation: Shift from a pure governance token to an economic token with value capture mechanisms

The proposal intends to use protocol fees earned from Uniswap DEX and Unichain sequencer to burn tokens. Unichain, Uniswap’s Layer-2 solution, generates significant revenue from sequencer fees. Using these revenues for UNI burns means Uniswap’s growth directly reduces token supply, creating a positive feedback loop.

Additionally, the proposal will prohibit Uniswap Labs from charging fees through its interface, wallet, and API. However, it remains unclear what proportion of these fees will be allocated for token burns. This ambiguity could become a focal point during governance voting, with the community possibly demanding clearer fee allocation plans.

Trading Volume Surges 584%, Market Sentiment Shifts

(Source: CoinMarketCap)

Following the proposal announcement, UNI’s price soared to its highest in two months, with trading volume exploding by 584%. Such a volume spike is a key indicator of sustainable price movement. In technical analysis, a breakout accompanied by increased volume often signals a genuine trend reversal rather than short-term speculation. The 584% volume increase indicates market enthusiasm for the UNIfication proposal.

Uniswap outperformed other top 30 cryptocurrencies by market cap, rising 20% in 24 hours to over $8.5. The token’s gains over the past 24 hours and 7 days significantly outpaced mainstream assets like Bitcoin and Ethereum, suggesting an independent rally driven by Uniswap-specific catalysts rather than broader market trends.

On November 12, UNI was temporarily reported at $8.52, up 1.5% for the day. The price reached a monthly high of $10.2 on Monday but is now pulling back. This correction from the high is a normal technical adjustment, as after a 28% increase in a short period, the market needs time to digest profit-taking and reassess valuation.

Technical indicators remain bullish, with RSI at 73, indicating UNI may soon enter overbought territory. An RSI above 70 is typically a sign of overbought conditions, suggesting potential short-term pullback pressure. However, in a strong upward trend, RSI can stay in overbought zones for extended periods. The MACD indicator is also in positive territory, confirming bullish momentum, with the MACD line expanding further.

Support at $7.2 and Breakout Target at $12

The 4-hour chart shows an upward trend for UNI/USD, but with low efficiency, as the coin surged sharply on Monday due to the UNIfication news. Currently, it is retracing but may resume its upward trajectory if the correction remains controlled. If the pullback continues, the price could fall toward $7.2, offering a potential buying opportunity. A rebound from this level would confirm the rally’s sustainability, especially given the volume concentration around $7.2, where many early breakout buyers may defend their positions.

$6.6 is a deeper support level; if $7.2 fails, this would be the last line of defense for bulls. Falling below $6.6 could invalidate the current bullish structure and trigger a deeper correction. However, given the fundamental support from the UNIfication proposal, the likelihood of dropping below $6.6 is relatively low unless the governance vote rejects the proposal or systemic market risks emerge.

If the upward trend resumes, UNI could retake Monday’s high of $10.2 within hours or days. Breaking above $10.2 would target Fibonacci resistance levels, with a potential surge toward new highs above $12.29 once UNI surpasses key Fibonacci levels at $9.41 and $10.52. This target is approximately 44% above the current price, offering an attractive risk-reward ratio for short-term traders.

Hayden Adams noted that this milestone marks Uniswap’s emergence as the preferred decentralized exchange for tokenized assets. Through coordinated governance incentives and fee-based token burns, UNIfication represents a structural shift that could shape UNI’s market trajectory over the coming years. This transition from a purely governance token to an economic token with value capture mechanisms may attract more traditional investors focused on fundamentals and cash flow.