YFI tripled the price of Bitcoin in a month and a half, positioning itself above USD 33,000. The low supply of YFI is the main reason for its unusually high price.
In the world of cryptocurrencies, decentralized finance (DeFi) embodies a kind of “revolution within a revolution”. For example, the YFI token, from the DeFi yearn.finance platform has recorded unprecedented growth in just a month and a half. Furthermore, its price almost triples that of the main cryptocurrency.
The growth of YFI is largely due to its simplicity, which contrasts with the complexity of the various protocols governing decentralized finance. The intricate mechanisms of yield farming, the handling of deflationary tokens, and the various strategies for liquidity mining, seem indecipherable even to many bitcoiners.
In mid-July, when the DeFi value locked growth curve was booming, the innovative protocol yEarn emerged. It aims to automate many of the transactions that DeFi traders perform manually.
Last August 29th, the token of this protocol YFI left behind Bitcoin’s all-time high, and almost doubled that all-time milestone on September 31st when it reached USD 39,238. At the time of writing this article, YFI trades at USD 29,908. YFI has appreciated more than 2,900%, in a month and a half.
However, the explosive growth of YFI, even within the burgeoning DeFi environment, does not seem enough to justify the price, which is more than triple that of BTC and almost 70 times that of ETH. The explanation could be the meager supply of YFI set at 30,000 tokens, of which 29,964 are issued already. In other words, there only remain 36 tokens to be issued to complete that amount.
This low supply leads YFI’s market capitalization to be just over USD 1 billion, which is more than 220 times less than Bitcoin’s market value. For this reason, the token occupies 27th place in the cryptocurrency ranking by market capitalization.
YFI and Associated DeFi Platforms
The creator of the yEarn protocol Andre Cronje described different tools associated with this protocol. These include an automated settlement service for Aave (yliquidate.finance) and an automated liquidity provider, yswap.exchange, which makes autonomous decisions depending on the incentives available.
Conje says that not all tools are available today. He mentions *.finance, which does not have a name yet. He defines it as “a protocol of credit delegation that transfers the ability to grant a loan from one smart contract to another.”
When depositing tokens in yearn.finance, the protocol converts them into yTokens, which it periodically “rebalances” to choose the loan service with the best benefits. The protocol continually reviews loan services like Aave, Compound, or dydx and decides which one to use. According to the creator of yEarn, the investor only provides liquidity and expects to obtain benefits.
He stated that this platform and all accompanying protocols are configurable, but he also revealed something interesting about the value of the token. There is a noticeable contrast between the statement of the person in charge of the yEarn protocol about the token that would be “totally worthless”, and the record price that it has reached in a few weeks.
By Alexander Salazar
