Yearn.finance’s native token, YFI, increased by more than 75% over the last 24 hours, reaching a new all-time high of USD 38,883 on the Binance pair (USDT). The strong upward movement also took DeFi’s token market capitalization above USD 1 billion.
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The general sentiment around YFI from decentralized finance (DeFi) enthusiasts remains seemingly positive. IDEOVC’s Ian Lee pointed to the rapid product launches of yearn.finance developer Andre Cronje as a positive long-term catalyst for YFI.
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In the last month, Cronje has launched several products, among them yinsure.finance. Many investors, including Fred Ehrsam of Paradigm, have emphasized the potential of DeFi ecosystem insurance to evolve into the next big market.
Rapid product development, as well as community activity around yearn.finance, is driving the upward trend of YFI. Lee wrote:
„We are witnessing something even bigger. Because of Andre Cronje’s speed of development and launch, YFI is the most rapidly evolving self-improvement/innovation asset, period.
In the long term, some analysts say the valuation of yearn.finance could reach several billion dollars. As the ultimate bullish scenario, analyst Tyler Reynolds suggested where there is a possibility of seeing a $15 billion market capitalization based on cash flow analysis (FCF):
„500k for $YFI = USD 15B mcap. If I were to quote an FCF 50 times higher, then I would need to generate USD 300M for holders. He is already generating USD 20M and that will increase as the yUSD/yCRV pair grows. Add in new arbitrage opportunities and other products (e.g. insurance) and we’re not far behind on the $300M FCF.
However, there are several risks in the long-term trend of YFI. The most obvious risk would be yearn.finance’s heavy dependence on its main developer Cronje. There is significant pressure on the developer to constantly launch new products and features.
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As with all DeFi tokens, there is also a risk of decreased performance. If the overall performance in the DeFi market declines, the demand for YFI and yearn.finance could also fall. The biggest threat to performance in the DeFi ecosystem is the price of Ether (ETH). If Ether declines steadily and causes governance tokens to fall as a result, performance could be substantially affected.
Important short-term variables
In the short term, two variables that could slow down YFI’s momentum are its valuation and liquidity. In terms of total blocked value, YFI reached its fair valuation above USD 700 million, getting closer to its competitors.
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A cryptomoney researcher known as „Hasu“ also said that compared to other pairs of stablecoins/DeFi-protocol, YFI tokens are illiquid. The slip of the YFI ETH pair is in line with LEND, but its stablecoin pairs are much lower.
„YFI may be breaking it right now, but it is as illiquid as hell since there is very little of the supply available on the exchanges. Try selling even $100,000 and you’ll reduce the price by 3%. By comparison, the slide in selling USD 100K in $LEND (another DeFi currency with a similar market cap) is 0.2%. I only checked the stablecoins pairs, not expecting the most liquid $YFI pair to be ETH. The slide in YFI/ETH is substantially less, in line with $LEND.