The overall DeFi ecosystem has given birth to some very valuable tokens. Yearn.finance’s YFI, for example, briefly surpassed $38,000 earlier today. The number of daily active addresses is also noting strong growth, which is worth keeping tabs on.
YFI Ecosystem is Growing
Whenever a crypto asset or token gains value in quick succession, it will attract a lot of attention. For Yearn.finance’s token, the price growth has been very spectacular. Its price has skyrocketed from an all time low of $31.65 to $38.869 in a month and a half. A very steep ROI for early investors, to say the very least. Given this success, YFI has become of great interest to speculators and investors alike.
Sustaining such a steep level of growth will prove challenging. It is not uncommon to see YFI drop by $4,000 or more and then bounce back shortly after. These price swings create a lot of profit taking opportunities. It also makes this asset a lot more speculative than any other DeFi token. The current value of YFI attracts a lot of people, resulting in decent ecosystem growth.
As can be seen in the chart above, there is an ongoing growth trend among YFI daily active addresses (DAA). Over the past month, there were at least 3,600 daily active addresses. The peak occurred a few days ago, reaching 32,900 daily active YFI addresses.
An interesting trend, and one that clearly correlates with the token price. The previous time a peak in DAA was reached, the numbers dropped for over a week straight. It will be interesting to see if history repeats itself.
Yearn.Finance TVL Drops Hard
In most cases, a DeFi token derives value from the total value locked on the platform. In the case of Yearn.finance, things are a bit different. Its total value locked, of TVL, has begun to retrace. The platform currently has just $787.5 million in TVL. A few days ago, it was approaching $1 billion. Over $117 million has been pulled off the platform in the past two days.
That trend is to be expected. A lot of DeFi platforms launch every week. Remaining competitive is complex, even for popular projects such as Yearn.finance. Money being pulled out may result in a lower YFI price as well. The exact correlation between the two remains a bit unclear. Its native token still has a market cap of over $1 billion. It is uncommon to see a token market cap higher than the TVL on the platform.
Keeping all of this in mind, the future of YFI will prove interesting. It has had a good run without seeing any real price correction. Sooner or later, something will have to give. Whether it will yield more bullish or bearish market momentum, remains to be determined. These markets can easily swing either way, given the current circumstances.