At least two traders have confirmed their bearish bias for YFI, a token that represents the year’s most popular decentralized finance project, yearn.finance.
The pseudonymous entities noted that YFI/USD’s recent price moves made a so-called Head and Shoulder Pattern. So it appears, the pair formed three peaks atop a single baseline-like support level. The middle peak was higher than the other two, which made it look like one big head with two lowered shoulders on both sides.
H&S is a trend reversal pattern, according to Investopedia.
The first analyst, known by his first name Nico, flashed a 20 percent price drop below the YFI/USD’s baseline – to $15,840. His chart revealed an anticipatory downside move towards $11,188, confirming the level as the primary target of the H&S breakdown action.
Meanwhile, the second pseudonymous analyst straightforwardly settled the H&S’s price target 25-30 percent below the baseline. That ideally put YFI/USD en route towards $13,480.
“Perfect breakdown of Head and shoulder,” he tweeted. “Expecting 25-30% of more downside in the coming week! BTC looks weak to so it goes perfect with it.”
Ideally, the breakout target of an H&S pattern is the height of the middle peak.
YFI Fundamentals
As the battle between bears and bulls continue, YFI continues to show promises when it comes to fundamentals. The governance token represents an emerging lending aggregator that currently holds more than $750 million worth of crypto assets in its liquidity pool.
As the yearn.finance protocol takes withdrawal and performance fees, it makes the project a cash-earning startup right from the beginning. At the same time, YFI holders, who enjoy voting rights over the protocol, direct a portion of those revenues to their holdings.
“At a minuscule supply of 30,000, this has some equating owning 1 YFI to owning 1/30,000th of a decentralized hedge fund,” noted Connor Dempsey, the researcher at Messari.
He further recalled that YFI was a token with substantially no value. yearn.finance’s founder Andre Cronje admitted that while distributing the first batch of YFI for free in August 2020.
“Given that most of the participants were already heavily embedded in the DeFi ecosystem, many have shifted their focus to working on yearn.finance full time” said Mr. Dempsey.
“With an army of incentivized volunteers, yearn.finance is shipping new features like crazy. As with yearn’s yield-optimizing smart contracts, all of these new features are value accretive to YFI token holders.”
Risks
Nevertheless, the new projects that are undertaken by yearn.finance and its founder Mr. Cronje should work as intended. Or, they risk causing a monetary stress to people who pour money into them. At the same time, they steal value out of the YFI token.
The risks became real this month after Mr. Cronje launched an external project, a card game with mintable tokens EMN through calling an Etherscan contract and depositing DAI, a stablecoin associated with another DeFi project, MakerDAO.
People injected millions of dollars into the contract. Unfortunately, a bug drained all the money, leading to massive losses. At the same time, YFI rates crashed, indicating that traders associated the failure of EMN with yearn.finance.