Arthur Hayes buys UNI again after three years; CryptoQuant CEO warns of upcoming supply shock

On November 11, Arthur Hayes made his first large purchase in three years, acquiring 28,670 UNI tokens (worth $244,000). This occurred shortly after Uniswap’s single-day surge of 21%, breaking above $10. On the same day, Ki Young Ju, CEO of CryptoQuant, predicted that if the Uniswap fee conversion proposal passes, the protocol will initiate a retroactive burn of 100 million UNI tokens and implement a fee burning mechanism, potentially triggering an unavoidable supply shock. On-chain data shows that the trading volume of Uniswap V2 and V3 versions has reached $1 trillion this year. Based on this scale, the annual burn amount could reach $500 million, significantly altering the token’s deflationary model.

Market Impact Mechanism of the Uniswap Fee Conversion Proposal

The “Unified Proposal,” jointly proposed by the Uniswap Foundation and Uniswap Labs, introduces two revolutionary changes: activating protocol fees for UNI token burns and establishing a fee discount auction system. Specifically, the proposal plans to retroactively burn 100 million UNI tokens, accounting for about 10% of the circulating supply, and also use 0.05% of trading fees in real-time for permanent removal of UNI from circulation. This dual deflation mechanism aims to address long-standing community concerns about insufficient token value capture.

CryptoQuant CEO Ki Young Ju’s modeling indicates that, assuming Uniswap maintains its current annual trading volume of $1 trillion, the fee conversion mechanism could generate approximately $500 million annually in burns. In token economics terms, this could cause a “supply shock”—a rapid reduction in circulating supply while demand remains stable or increases, leading to sharp price rises. Historical precedent supports this: during similar discussions in 2023, UNI surged 70% in a week. The specific implementation path included in this proposal greatly increases the likelihood of its approval.

Institutional Positioning and On-Chain Signals Confirming UNI

Hayes’ purchase was revealed by blockchain tracker Lookonchain, sparking widespread market attention. Known for precise market timing, Hayes’ last public crypto transaction was three years ago. On-chain data shows that the wallet address used to buy UNI matches known patterns of Hayes’ addresses, with a significant proportion of his crypto holdings. This move is interpreted as a substantive vote of confidence from professional traders regarding the prospects of the Uniswap proposal.

Other on-chain indicators also signal positive momentum: the number of UNI holder addresses increased by 52,000 within 24 hours; whale transactions (single trades over $100,000) grew by 180%; and the borrowing rate for UNI on decentralized lending platforms spiked to 20%. This comprehensive activity differs from mere speculative rallies, indicating that investors are actively positioning for potential governance outcomes. Notably, UNI has successfully broken above the 200-day exponential moving average, a long-term trend indicator often signaling a significant shift.

Key Data on Uniswap Fee Proposal

Deflation Mechanism

• Retroactive burn amount: 100 million UNI
• Real-time burn rate: 0.05% of trading fees
• Total supply share: approximately 10%
• Implementation phases: prioritize V2/V3

Trading Volume

• Year-to-date volume: $1 trillion
• Potential annual burn: $500 million
• Whale transaction growth: 180%
• New addresses (24h): 52,000

Trends in Value Rebuilding for DeFi Governance Tokens

The Uniswap proposal marks a key attempt to transform DeFi governance tokens from mere “governance rights” to “productive assets.” Traditionally, governance tokens only grant voting rights without direct cash flows or value accumulation mechanisms. Fee conversion fundamentally changes this, making UNI akin to equity in traditional finance, allowing holders to share protocol-generated revenue. This shift could inspire industry-wide imitation—major DeFi protocols like Curve, Compound, and Aave are already convening governance meetings to discuss similar mechanisms.

From a regulatory perspective, the fee conversion design demonstrates a clever balance. By channeling revenue into token burns rather than dividends, the protocol may avoid key criteria for securities classification—specifically, the “expectation of profits derived from the efforts of others” in the Howey test. Recent statements by SEC Acting Chair Hester Peirce about “fully decentralized protocols being exempt from securities registration” provide policy space for such innovations. If Uniswap’s proposal passes and remains unchallenged by regulators, it could open a new compliant pathway for the entire DeFi industry.

UNI Market Structure and Trading Opportunity Analysis

Technically, UNI shows a typical breakout pattern. After testing support at $5 four times, it successfully broke out of a descending triangle. The daily RSI rose to 68 but did not enter overbought territory. In derivatives markets, the perpetual contract funding rate remains at a reasonable 0.012%, with no signs of excessive leverage. Options data shows a 320% increase in open interest for December-expiring $12 call options, indicating professional investors expect further upside.

Price models based on supply changes suggest two scenarios: if the proposal passes and trading volume remains steady, a 10% reduction in circulating supply could push the price to $11–12. If trading volume increases to an average of $150 billion per month, network effects could lift the price toward $19. These estimates are derived from a core valuation formula involving TVL, market cap, and token velocity, with the TVL/MC ratio expected to improve from 0.38 to 0.52.

Risk Factors and Investment Strategy Recommendations for UNI

Despite optimistic prospects, investors should remain cautious of three key risks: regulatory challenges—SEC scrutiny over fee conversion could lead to classification as a security; technical risks—smart contract upgrades may contain vulnerabilities, so a two-week security audit is advised; market risks—the overall crypto beta remains high at 1.8, and if Bitcoin falls below $100,000, UNI could retrace to around $7.5.

For different investor profiles, tailored strategies are recommended: conservative investors can gain exposure via Grayscale UNI Trust or future spot ETFs; aggressive investors may hold UNI directly and participate in governance voting; DeFi-native users can provide liquidity in ETH/UNI pools on V3 to capture annualized yields of 40–80%. All strategies should include strict stop-losses, with $8.5 as a key risk control level—corresponding to the worst-case scenario if the proposal is rejected.

Conclusion

Arthur Hayes’ return and CryptoQuant’s supply shock warning highlight the significance of the Uniswap fee conversion proposal. This is not just an adjustment to a token’s economic model but a critical test of DeFi governance tokens evolving from “governance rights” to “value-accumulating assets.” If successful, it could trigger a reevaluation of value across the decentralized finance ecosystem and lay a new foundation for DeFi growth.