Yearn.finance price achieved a new record high at $38.883, as its market capitalization surpassed $1 billion

By Selena On Aug 30, 2020

Yearn.finance (YFI) price has risen more than 75% over the past 24 hours, hitting a new all-time high at $ 38.883 on Binance. The strong bullish move also put YFI’s market cap above $ 1 billion.

YFI/USD 4-hour chart | Source: TradingView

Traders are excited but is the Yearn.finance price overvalued?

The general sentiment surrounding YFI from DeFi enthusiasts seems to remain positive. IDEOVC’s Ian Lee pinpointed yearn.finance’s developer Andre Cronje’s fast-paced product releases as a positive long-term catalyst for YFI.

Over the past month, Cronje has introduced a variety of products, including Yinsure.finance. Many investors, including Paradigm’s Fred Ehrsam, have highlighted the potential of DeFi insurance to develop into the next major market.

The rapid development of products, as well as the active community around Yearn.finance, are driving YFI’s uptrend.

Lee shared:

We are witnessing something even bigger. Due to @AndreCronjeTech’s build & ship speed, $YFI is the fastest evolving self improving / innovating asset, period.

Then when put in context of crypto & DeFi’s market growth, $YFI could reach $100B+ market cap in 5 yrs (1 YFI = $3M+). https://t.co/uKhMlQIsw8

— Ian Lee (@ianjohnlee) August 29, 2020

Over the long term, some analysts say that the valuation of Yearn.finance could reach several billion dollars. As the ultimate bull case, analyst Tyler Reynolds suggested the possibility of a $ 15 billion market cap based on cash flow analysis.

He said:

500k $YFI = $15B mcap
If it traded at 50x FCF, then it would need to generate $300M for holders
It’s already generating $20M and that will go up as yUSD/yCRV grows
Add in other new arb opportunities & products (eg insurance) and we’re not far from $300M in FCF

— Tyler Reynolds (@tbr90) August 29, 2020

However, there are several risks in the long term trend of YFI. The most obvious risk would be the heavy dependence of yearn.finance on its core developer Cronje. There is significant pressure for the developer to release new products and features.

Like all DeFi tokens, there is also a risk of declining yield. If the overall yield in the DeFi market declines, the demand for YFI and yearn.finance could also drop. The largest threat to the yield in the DeFi space is the price of Ether (ETH). If Ether continuously declines and causes governance tokens to slip as a result, the yield might drop substantially.

Important near term variables

In the near term, two variables that could slow the momentum of YFI are its valuation and liquidity. In terms of total value locked, YFI has reached its fair valuation above $ 700 million, closer to its competitors.

A cryptocurrency researcher known as Hasu also said that when compared to other defi-protocol stablecoin pairs, YFI’s are illiquid. The slippage of YFI’s ETH pair is in line with LEND, but its stablecoin pairs are much lower.

Hasu wrote:

“Yearn.finance price may be ripping right now, but it’s illiquid as hell as very little of the supply is available on exchanges. Try selling even 100K and you’ll tank the price by 3%. For comparison, the slippage on selling $100K worth $LEND (another DeFi coin with similar mcap) is 0.2%. I only checked stablecoin pairs, not expecting that $YFI’s most liquid pair would be ETH. Slippage on YFI/ETH is substantially lower, in line with $LEND.”

CEO of BitMEX has predicted that the price of Yearn Finance (YFI) will reach $100,000

With its fair distribution, YFI became the most expensive altcoin, flipping Bitcoin’s value and peaking at almost $40,000 on Binance. Now, the cryptocurrency is trading at around $32,000, following a correction. In any case, this has prompted industry leaders such as Arthur Hayes, the CEO at BitMEX, one of the world’s leading Bitcoin margin exchanges, to make bold predictions.

According to him, Bitcoin will reach $100,000.

1 $YFI = $100,000 pic.twitter.com/KjW26SXfmc

— Arthur Hayes (@CryptoHayes) August 29, 2020

YFI is the governance token of the yield aggregating platform Yearn Finance. Launched in late July, the protocol attracted countless investors looking for profitable yield farming opportunities amid the booming DeFi sector. At press time, Yearn Finance has about $1 billion in TVL, up from $8 million back when the project started on July 17th.

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