It has now been over a month since it was revealed that Uniswap Labs had received a Wells Notice, indicating the U.S. Securities and Exchange Commission intends to bring charges against the developers of the largest decentralized exchange.
Many people considered this the true start to the “war on DeFi,” since it's the first case being brought against a major DeFi platform. While it's no secret the SEC has an unfavorable view of crypto, its previous big-name targets have typically been centralized entities.
The SEC has not slowed its crypto rampage since, most recently, sending Wells Notices to Consensys and Robinhood's crypto arm. Shortly after the Wells Notice news broke for Robinhood, the firm reported first-quarter earnings, where crypto trading volume increased 224% compared to the year prior.
The impacts of the notice still seem to be weighing heavily on DeFi, as questions about the future and what this means for the industry loom. That being said, nothing too severe is likely to happen in the short term. Coinbase received its Wells Notice in March 2023 and wasn't actually sued until June 2023, and that legal battle is still ongoing almost a year later. Coinbase has continued to operate normally in the meantime.
But naturally, the price of UNI, Uniswap's governance token, tumbled after the news. UNI was trading around $11.60 ahead of the Wells Notice and dropped as low as $6.43 in the immediate aftermath. While it has found its footing at just over $7, it has not shown much of a rebound. The same can be said for many of the other DeFi assets that felt the heat.
DeFi dominance, or the share of DeFi tokens' market cap relative to the total market cap of cryptocurrencies, dropped to 3.63% on April 14, just days after Uniswap's Wells Notice announcement. It's the lowest the share has been since June 2022, when the fallout from Terra /Luna caused a selloff in many crypto assets.
DeFi dominance has bounced back a little and seems to have found a new equilibrium, hovering just below 3.75%. This is historically very low, especially for the dominance to stay at this level for so many days. Even back in 2022, DeFi's dominance returned above 4% by July. DeFi dominance actually stayed above 3.75% from June 2022 to April 2024.
It's not surprising that the impact of the Wells notice would be material to the DeFi space, but it's unclear now what can help give the subsector a boost unless positive news comes out from the lawsuit.
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