The environment of decentralized finance is full of surprising news. This time the attention is taken by UMA, capable of multiplying by 3 its market capitalization in only 5 days, thus surpassing yearn.finance, and positioning itself as the 2nd largest DeFi project.
Yesterday UMA reached a maximum capitalization of $1.231 billion, which boosted the price of the token to $30.
At the time of writing, UMA’s price is $20.41 per unit, and its capitalization is $1.004 billion.
What drove UMA and how is it different from yearn.finance?
UMA offers an infrastructure for using invaluable financial contracts to create synthetic tokens, and a data verification mechanism with oracles. It uses the Ethereum network to run these services.
Synthetic tokens are used to track data on an underlying asset without taking risk. This is done through an incentive mechanism, which rewards users who identify inappropriate collateral.
By using this mechanism, UMA decreases the use of oracles, which team spokespersons see as an advantage. This is the main catalyst for the project’s growth during the last few days.
For the team behind UMA, oracles are the biggest problem facing the DeFi environment today.
This is demonstrated by recent problems, such as bZx Flash, Maker’s Black Thursday and SNX Oracle’s front end operation.
Minimizing the use of oracles will make decentralized finance more secure, and they have designed the “invaluable“ contract to do so.
Unlike yearn.finance which offers rewards for staking, UMA is much closer to oracles; however it is listed as a DeFi project for offering an infrastructure for this environment.
Advantages and disadvantages of decentralized staking
With the exponential rise in the price of the UMA token, it is more than clear that the short-term trend has remained upward.
The 8-day EMA and 18-day SMA moving averages are crossing upwards in support of this trend, and could function as dynamic supports in the reversal that the price is trying to realize.
After reaching an all-time high of $30, thus surpassing yearn.finance’s capitalization, UMA began a major setback, which today we see as it has been able to initiate a downward transition from the intraday trend.
On the 4 hour candlestick chart, the EMA 8 and SMA 18 period moving averages are crossed downwards, as a result of the $22 support breakout.
For the time being, it is quite likely that we will see a continuation of the decline. This will work as a break in the short term trend, before continuing its upward path. The $15.73 demand zone may be visited in the next few hours.
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All our publications are of an informative nature and should not be regarded as investment advice.