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Yearn Finance’s native token YFI debuted with an explosive price rally, surging from zero to over $44,000 in just 45 days of trading. But as hopeful traders anticipated an extended bull run towards $100,000, bearish catalysts pulled the rug under their feet.
The YFI/USD exchange rate crashed by almost 78 percent from its all-time high near $44,026. At first, the downside move appeared as a natural price correction that typically follows major upside rallies. Nevertheless, YFI failed to find a concrete support level, showing that traders were in no mood to re-accumulate the token.
On Tuesday, YFI/USD fell below $10,000 – a psychological support level – for the second time in four days. The latest decline came after an upside rejection around $11,200, a resistance level YFI tested repeatedly since October 30.
Below are three reasons why YFI broke below $10,000, followed by an outlook of its impact on the token’s future price trend.
#1 Bitcoin Dominance
The influence of Bitcoin on its rivaling digital currency projects was visible all across the recent days.
The flagship cryptocurrency’s market dominance increased from 57.52 percent on October 21 to 64.66 percent on November 3. It suggested a higher capital migration from altcoins to the Bitcoin market, especially as the latter’s adoption boomed among significant corporations as a hedging asset and payment firms (read PayPal) as a mode of payment.
Bitcoin Dominance trends upward on Bitcoin's growing adoption curve. Source: BTC.D on TradingView.com
The entire altcoin market succumbed to Bitcoin’s relentless growth. The bearish bias also engulfed the decentralized finance (DeFi) sector, whose projects were sitting atop triple- to quadral-digit profits on a year-to-date basis.
At a 1,200 percent profit, YFI became a perfect scapegoat for traders looking to lock-in their short-term gains to move the proceeds later to the Bitcoin market. Even on Tuesday, YFI’s slip below $10,000 came on the backs of a stable Bitcoin, which was trading more than 1 percent higher on a 24-hour adjusted timeframe as of 11:00 UTC.
#2 Lack of Leadership
Under the leadership of Andre Cronje, who amassed a strong fan-following for himself after releasing back-to-back yield farming projects, Yearn Finance emerged as the DeFi sector’s unicorn project.
Research and analysis firm Messari called Mr. Cronje an “enigmatic founder,” later adding that his leadership prompted Yearn Finance “to grow from a simple yield aggregator into a comprehensive DeFi ecosystem.”
The reasons were out in open. Months after its launch, Yearn Finance has introduced a series of additional services. They included products focusing on insurance, venture financing, decentralized exchange, lending, and stablecoin. That promised to grow YFI’s adoption further.
But things turned haywire after Eminence, a project Mr. Cronje launched away from the Yearn Finance. It was not a public launch but was available online for Mr. Cronje’s own preference for testing products in real-time. Unfortunately, his fans did not look at Eminence that way.
1/ A timeline of events in the EMN scandal
Andre Cronje, founder of Yearn Finance, hyped a surprise launch.$emn $yfi pic.twitter.com/qsGhLOrZIw
— EMN Investigation (@EMNInvestig) October 10, 2020
The injected around $15 million into the Eminence smart contract, believing the project’s native token EMN would repeat the YFI’s 1,200 percent price rally. But a bug in the contract drained the pool of all the deposited funds.
Eminence’s inability to secure people’s funds led to a negative hysteria in the Yearn Finance space. At first, the protocol started witnessing withdrawals from its liquidity pool. Meanwhile, YFI, which was already correcting lower from its $44,000-peak, became the victim of accelerated sell-offs.
Later, Mr. Cronje left the Yearn Finance project altogether. To this date, the protocol remains leaderless, relying on active community members for growth. Meanwhile, the founder faces accusations of intentionally duping his followers.
https://twitter.com/CryptoWhale/status/1310797351758499848
As a result, YFI keeps suffering under the weight of Mr. Cronje’s popularity. Its decline below $10,000 proves the same.
#3 YFI Falling Wedge
Meanwhile, YFI’s decline may also have to do with a technical structure.
Dubbed as Falling Wedge, the bullish reversal pattern emerges when an asset trends lower inside a contracting range, leaving behind a series of lower highs and lower lows.
The Yearn Finance token forms a bullish reversal pattern. Source: YFIUSD on TradingView.com
It is likely that YFI slipped below $10,000 to test the area around the Wedge’s apex. That is way down near $8,000.
But despite an extended downside move, a Falling Wedge pattern indicates an imminent upside rebound. Should it happen, the price would eventually break above the Wedge resistance towards a primary upside target about $22,656 above (the maximum height of the Wedge).
