Swerve Price Analysis – Decentralized exchange aims to reward community

Swerve is a fork of the Automated Market Maker (AMM) based Decentralized Exchange (DEX) protocol Curve. Unlike other AMM DEXs, Swerve and Curve aim to swap between tokens of the same value, such as stablecoins. Swerve currently has four stablecoins within one pool; DAI, USDC, USDC, and TUSD. The Swerve DAO token (SWRV) is a governance token with the ability to accrue Swerve exchange fees based on a time-based staking system.

Source: Swerve.fi

Swerve was forked anonymously from Curve, by a dev known as John Deere, in September 2020. Swerve was launched with a firm focus on community driven ownership. According to the founder, “There’s no fake-out deployment, no questionable pre-mining, no founder controlling majority of the governance vote, no suspect team proposals, no 30% allocation to ‘shareholders’, no team allocation, no decades long distribution, none of it.”

Liquidity providers (LPs) earn ySWRV which can be staked in the DAO to earn SWRV. LPs provide their capital for a specific liquidity pool. LPs replace the traditional order books of centralized exchanges. The SWRV governance token has a max supply of 33 million with all tokens unlocked through liquidity incentives over the next six years. For the first two weeks, nine million tokens were released, with another nine million tokens released over the next year and another three million tokens released for years two through six. Swerve exchange fees are also currently 0.03% vs Curve’s 0.04%.

Nearly US$18.5 million is locked within the Swerve protocol, as opposed to US$4.26 billion currently locked within the Curve protocol. After the first two weeks of liquidity incentives ended, the total value locked dropped dramatically.

Source: DefiPulse

On-chain SWRV token stats reveal ranging transaction counts and steadily increasing transaction sizes. Transactions per day hit an all-time high of 4,482 on September 11th, 2020, during the first two weeks of token distribution. Average transaction sizes hit an all-time high of US$13,850 this week. Since late December, transaction counts have doubled and transaction sizes have increased by 6x.

Source: CoinMetrics

The weekly Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (red line) has decreased from a high of 57 to a low of 10 over the past few months. A clear downtrend in NVT suggests a coin is undervalued based on its economic activity and utility, which should be seen as a bullish price indicator. Weekly active addresses stabilized in October and have remained near 100 for the past few months.

Source: CoinMetrics

On the development side, the Swerve Finance GitHub account has three repos with two active developers. Most coins use the developer community of Github where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.

Source: GitHub – SwerveFinance/SwerveContracts

Source: GitHub – SwerveFinance/swerve-ui

Source: GitHub – SwerveFinance/swerve-web

Technical Analysis

Roadmaps for future market movements can be found on high timeframes using Exponential Moving Averages, Volume Profile Visible Range, Pivot Points, Ichimoku Cloud, and divergences. Further background information on the technical analysis discussed below can be found here.

SWRV has a limited trading history and needs to be analyzed on lower timeframes, as opposed to the daily chart. On the four-hour timeframe, the 50-period Exponential Moving Average (EMA) and 200-period EMA crossed bullish on January 17th, which has resulted in a 155% increase. Upside resistance, based on monthly pivots, sits at US$2.12 and US$2.60.

Price is currently nearly 1.4x from the 200-period EMA and has not touched the 200-period EMA since January 15th. If the horizontal support fails, the next significant support sits at US$1.30 based on monthly pivots, VPVR, and the 200-period EMA. Additionally, there are no current bearish divergences on volume or RSI to suggest weakening bullish momentum.

Turning to the Ichimoku Cloud, four metrics are used to indicate if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

Cloud metrics on the four-hour timeframe, with doubled settings (20/60/120/30) for more accurate signals, are bullish; the spot price is above the Cloud, the Cloud is bullish, the TK cross is bullish, and the Lagging Span is above the Cloud and below the current spot price. The trend will remain bullish so long as the spot price remains above the Cloud, currently at US$1.50.

On the four-hour SWRV/BTC pair, trend metrics are neutral to bearish with price above the 200-period EMA and below the Cloud. A definitive long entry signal will trigger once the TK lines recross bullish with price above the Cloud. Downside support based on the 200-period EMA, VPVR, and monthly pivots sit in the 2,300 to 3,000 sat zone. Upside resistance based on monthly pivots sits at the 4,600 sat and 6,000 sat horizontal levels. Additionally, there are no current bearish divergences on volume or RSI to suggest weakening bullish momentum, although volume has continuously declined since mid-January.

Conclusion

Non-custodial decentralized exchanges (DEXs) have quickly risen to prominence since mid-2020, along with the rise of various other DeFi mechanisms. Swerve and Curve Finance are unique amongst their peers, filling the stablecoin swaps niche exclusively. Swerve aims to recreate the Curve protocol ecosystem with a community-driven token dynamic. Currently, the strong market leader remains Curve over Swerve, based on the US$4.26 billion vs US$18.25 million total value locked on both platforms, respectively. Thus far, SWRV on-chain token stats show a sluggish start for the anonymously forked protocol.

Technicals for the SWRV/USD pair show a bullish trend with prices over the 33-day EMA and four-hour Cloud. Upside resistance sits at US$2.12 and US$2.60 with significant support at US$1.30 to US$1.50. Technicals for the SWRV/BTC pair are neutral to bearish with prices above the 33-day EMA but below the four-hour Cloud. Downside support sits in 2,300 to 3,000 sat zone and upside resistance at the 4,600 sat and 6,000 sat horizontal levels.