27. August 2020

The price of YFI reaches $16,000 and exceeds Bitcoin… but there is a catch

On August 20, yearn.finance’s native YFI governance token eclipsed the price of Bitcoin (BTC) to $16,600. The all-time high was reached on Binance, fueled by growing demand for Decentralized Finance (DeFi) and industry associated tokens.

Although there are some cryptocurrencies that currently have even higher unit prices than YFI, many of them have insignificant trading volumes.

Instead, a quick look at the YFI order book at Binance shows significant trading volumes and strong token demand.

Investor sentiment towards YFI’s surge that began in early August remains mixed. Some believe that YFI is on the verge of a pullback. Others expect further growth potential in the long term.

What is YFI and why has it increased so much?

Yearn.finance is a DeFi protocol launched in July by developer Andre Cronje, without pre-mines and with a decentralized configuration. It is the first protocol on Ethereum that claims to give token owners all the power to govern the network.

The analysis company blockchain IntoTheBlock commented:

„Just a month ago, the yearn.finance token price was around $1,000. #YFI has increased 10 times in a month, reaching $10,551.25. yEarn Finance is the first project on Ethereum whose governance is entirely in the hands of token owners.“

Hasu, a researcher in the crypto industry, defines yearn.finance as a platform that allows users to implement various investment strategies:

„If you don’t know Yearn, you can see it as an intelligent bank account that automatically assigns your assets to different low-risk investment strategies executed on the Ethereum blockchain“.

The price of YFI, the governance token of the protocol, increased naturally in parallel with the total value locked in yearn.finance. According to data from Defipulse, more than $750 million of capital is currently locked in yearn.finance.

YFI’s limited offer leads to a higher price

Compared to other tokens, the price of YFI is high because of its special offer, limited to 30,000 units, significantly less than most digital assets.

Thus, although YFI’s price has exceeded $16,000, its market capitalization remains below $400 million. In terms of market cap, it is currently the 41st largest cryptocurrency in the global market.

For this reason, startup crypto investor Ian Lee explained that YFI’s overtaking on Bitcoin is more of a psychological event:

„YFI has overtaken BTC, but it is an arbitrary and more psychological event than it really is. What matters is what yearn.finance is doing and what Andre Cronje is building in DeFi“.

If yearn.finance could reach a market cap similar to other major DeFi protocols, like Aave and Maker, its price would be $30.000 because of its limited offer. In other words, comparing YFI’s price to Bitcoin Loophole doesn’t make much sense, since Bitcoin has a market cap 568 times bigger than yearn’s.