YFI Ready to Take Off As The ‘Ultra High Beta’ or About to Get Smoked?
The DeFi market is going through winter right now, as prices of these tokens take a pullback after making all-time highs during August and September.
Since hitting those peaks, some Defi tokens have taken a harsh beating, like CRV, SUSHI, and bZx, which are down over 90%, some like Aave, Maker, and Loopring only went down about 40%. Amidst this, Yearn.Finance’s governance token YFI is somewhere around the middle.
In August, 1 YFI became equal to 1 BTC and then went past Bitcoin’s ATH $20,000 soon after. It was in the mid of September that YFI hit its peak at $43,678, as per CoinGecko.
Making new highs means the digital assets have to get ready for a correction, and that’s exactly what happened as the DeFi sector as a whole went through a winter.
So Much More Affecting YFI
YFI’s losses were exacerbated because of Eminence.Finance, a project by YFI founder Andre Cronje that rug pulled $16 million. Trader and economist Alex Kruger said,
“YFI has been getting Creamed. Recent underperformance relative to other cryptos has been notable. One could argue it is the chart. But it is not. One can find plenty equally poor charts across crypto. This IMO is the marketplace punishing YFI by removing the Cronje premium.”
According to him, although yields matter which has fallen, the blatant negligence around the EMN launch from Yearn and “how poorly the aftermath was handled… many exited/reduced YFI positions because of it.”
At the time of writing, YFI/USD has been trading at just above $18,000.
Another reason for this poor performance could be the overall drop in activity in the DeFi sector. Jason Choi of crypto fund The Spartan Group said,
“August has been a phenomenal month for DeFi bulls. Now we're in the hangover phase of the DeFi party.”
Amidst this rout, we are seeing “flight to quality in yield farming,” with Uniswap accounting for 70% of all TVL in yield farms despite its modest returns of 20%-30%. Choi said,
“The shift in sentiment was rapid. Even “degen” farms offering north of 1500% APY are only attracting ~1/10th of the TVL they did just a month ago.”
“drop is risk appetite and collapse in APY is a direct result of -ve price performance of new crop tokens.”
Moreover, with CRV “buckling under continual inflation sell pressure,” it is affecting YFI as well as yCRV APYs on Yearn.Finance accounts for 60% of its activity.
Macro in Focus
While some call for YFI to go down to four digits due to a head and shoulders pattern, trader Josh Rager sees it making new highs as it has found support at a major 0.618 fib level.
Kruger is also still bullish on this DeFi token despite the price of the token crashing 45% in six days as he said,
“The YFI bigger picture bull case remains unchanged. Odds are high this whole ordeal is short term noise.”
The EMN event, however, should remind speculators of YFI’s high ‘founder risk’ as seen in early August when an interview about Cronje “close to quitting DeFi” tanked the price of YFI.
Overall, the trader expects crypto to take off again after the elections and for DeFi to push even further “as the ultra high beta.” Kruger said,
“Macro matters now. So it makes sense to play from the long side. But if crypto crashes, YFI would get smoked, and no fundamental analysis would stop that.”