A certain DEX burns 100 million tokens but still drops 6%: fee revenue falls short of expectations, triggering a sell-off wave

Source: TokenPost Original Title: Uniswap, 100 Million Tokens Burned Yet 6% Drop…Profit Expectations Turn into ‘Disappointing Sell-Offs’ Original Link:

Market Phenomenon

The governance token of a leading DEX dropped 6% after burning 100 million tokens. Despite the long-anticipated fee conversion feature going live, market reactions have been less than ideal.

Key Event

A DEX laboratory announced the destruction of 100 million tokens, valued at approximately $593 million. This is part of the “Token Upgrade” plan. After the announcement, the token price experienced a maximum decline of 6% within 24 hours, followed by a slight rebound, but it remains about 4% lower than the previous day, with trading prices around $5.95.

“Token Upgrade” represents a structural shift in the protocol, focusing on reforming the fee distribution mechanism. The core feature is the “Fee Switch,” which sets interface fees to zero while retaining protocol fees on some Ethereum mainnet transactions. Collected fees will be used to buy back tokens from the market and burn them again.

Market Response and Analysis

This update was approved via DAO vote on Christmas Day. After years of controversy, the fee conversion plan has finally been launched. Although there was discussion about directly distributing fees to holders, the burning plan was ultimately adopted.

However, market reactions have been disappointing. Some analysts believe the token’s decline is due to fee revenue falling short of expectations. DeFi analysts pointed out: “Currently, fee conversion on the Ethereum network generates about $30,000 daily, with an annualized yield of only around $11 million, which is disappointing for initial returns.”

Analysts added: “While token burning reduces supply, the current scale is insufficient to positively impact the price.” The market psychology may follow the pattern of “buy on rumors, sell on news,” as the token has already been priced in ahead of the fee switch feature launch.

Industry Position and Outlook

This platform is currently the second-largest decentralized exchange, with a 24-hour trading volume of about $1.3 billion. Over the past year, it has accumulated over $1 billion in fee revenue, demonstrating strong profitability and governance advantages in the DeFi space.

Although this update clearly initiates a process of reducing token supply, whether token burning can immediately have a positive effect on the price remains to be seen. If fee revenue increases in the future, its cumulative effect may gradually become evident.

Key Points

Market Interpretation: Large-scale token burns are generally seen as a bullish signal, but due to the fee structure’s revenue falling short of expectations, the market is disappointed, leading to sell-offs based on prior expectations.

Strategy Tips: In the long term, reducing token supply is a positive factor, but short-term profitability remains low, and creating substantial demand is crucial. Future protocol trading volume and fee growth will be key variables.

Terminology Explanation:

• “Token Upgrade”: The protocol’s fee structure reform plan, including mechanisms to use part of fees to buy and burn tokens.
• “Fee Switch”: Activates the previously disabled protocol revenue recovery function, allowing part of user fees to be used for protocol operations.