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Yearn.finance (YFI) Just Plunged by Over 10%: Here’s What’s Driving the Move
Nick Chong | Sep 19, 2020 | 21:16
- Decentralized finance’s Yearn.finance (YFI) has dropped 10% in the past 24 hours despite strength in Bitcoin.
- The YFI coin is down over 33% from its all-time high price set just weeks ago.
- The coin seems to be dropping due to a wider bout of weakness in DeFi, caused by a number of trends.
- YFI’s long-term fundamentals remain bullish despite the recent downward trend.
Yearn.finance (YFI) Just Dropped 10%: Here’s What’s Driving the Move
Yearn.finance (YFI) has dropped over 10% in the past 24 hours as sellers have begun to mount pressure. The coin now trades under $30,000, a pivotal pyschological and technical support level that held on previous downtrends.
The coin seems to be moving lower due to overall weakness in the DeFi space, spurred by a number of fundamental trends.
Analyst “Theta Seek” recently shared a Twitter thread outlining why the decentralized finance ecosystem could be reaching a medium-term plateau. He cited a confluence of reasons, some of which are as follows:
- User experience of DeFi is still mediocre due to the fear of losing funds in protocols due to hacks, bugs, and simple misuse.
- The inflows of cryptocurrency entering DeFi has begun to slow down, suggesting that growth may be nearing a peak and profit taking is taking place.
- Regulators may soon target DeFi.
Due to this weakness in DeFI, a swath of other tokens related to the space have dropped in the past few days.
Long-Term Fundamentals Still Bullish
While YFI is hurting from a wider drawdown in the DeFi market, the long-term fundamentals of the project remain bullish.
Mechanism Capital, a crypto-asset firm headed by Andrew Kang, published a framework on YFI’s valuation just recently. The research piece suggested that the bullish discounted cash flow anaylsis of Yearn.finance is in excess of $300,000:
“Our bullish DCF case yields prices of $241k and $315k, depending on whether a performance fee is applied to yToken revenue. A TVL of over $150 billion by the end of 2024 is certainly aggressive — that’s almost 3x the current market cap of ETH! — but given the growth of stablecoins & vaults that we have already witnessed and the fact that we have only implemented a fraction of potential strategies that are planned we do not believe that this scenario is out of the question.”
The firm added that there is much capital entering the DeFi space that could drive YFI much higher than it is now:
“We also don’t want to forget that tokenized real world assets are beginning to enter DeFi. Yearn’s total addressable market is orders of magnitude larger than its TVL, and its yet-to-be-released financial primitives could further catalyze growth and network effects.”
Yearn.finance continues forward on a short-term time frame as well, with its developers launching innovative projects and the YFI community gaining steam.
Featured Image from Shutterstock Price tags: yfiusd, yfibtc, yfieth Charts from TradingView.com Yearn.finance (YFI) Just Plunged by Over 10%: Here's What's Driving the Move
