Yearn.finance (YFI) underwent a strong bounce on Friday after the coin hit multi-week lows of $9,800. The cryptocurrency surged around 20% from $9,800 to $11,900 over the span of eight hours.
But unfortunately for buyers of the cryptocurrency, it has continued to decline. Yearn.finance’s governance token currently trades for $10,500, failing to hold the aforementioned highs despite strength in the Bitcoin price.
Related Reading: Here’s Why Ethereum’s DeFi Market May Be Near A Bottom
Yearn.finance Drops Toward $10,000
YFI currently trades for $10,500, down over 10% from the local highs of $11,900.
Market data suggests that this continued sell-off is a byproduct of futures short selling. Mechanism Capital’s Andrew Kang shared the tweet seen below on October 30th, noting that YFI’s recent downward price action has been predicated on the open interest of Binance’s YFI futures market rising. This indicates that investors may be increasingly shorting the asset, resulting in downward price action.
There were also a number of transactions spotted by investors where early YFI adopters deposited large sums of the cryptocurrency into Binance. It is believed that those coins were sold for fiat, resulting in some of the downward price action we are seeing now.
OI on $YFI at new ATHs, surpassing first capitulation at 12k earlier this month
12k-15k liquidity capitulated into high volume at 10ks (same as first capitulation into 12ks
Sell side orderbooks thin
What happens to shorts on a bounce up? pic.twitter.com/Bc03Vhm2Cn
— Andrew Kang (@Rewkang) October 30, 2020
The drop in the price of the Yearn.finance coin comes in the face of positive fundamental trends. Yields offered by the protocol’s Vaults products have begun to move higher as fresh strategies have been activated. Yearn.finance developers are also expected to roll out Vaults V2 shortly, which should further improve the performance of the protocol and fees accrued to YFI holders.
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Expect Altcoins to Underperform?
While YFI may have fundamentals going for it, they may not be enough to stop the cryptocurrency from underperforming relative to Bitcoin.
Su Zhu, CIO and CEO of Three Arrows Capital, recently stated that Bitcoin rallying rapidly will automatically compress altcoin returns:
“$BTC going up swiftly is not only not bullish for alts but it’s bearish. Reasons for this are myriad but boil down to the fact that money is a coordination game and Bitcoin is the Schelling point; this is independent of how you feel about it, community is literally irrelevant.”
Analyst Qiao Wang also recently stated that he wouldn’t be surprised to see DeFi coins such as Yearn.finance’s YFI drop further from here.
Related Reading: 3 Bitcoin On-Chain Trends Show a Macro Bull Market Is Brewing
Featured Image from Shutterstock Price tags: YFIUSD, YFIBTC, YFIETH Charts from TradingView.com Yearn.finance (YFI) Plunges Back Toward $10,000 Despite 15% Relief Rally
This article is Originally posted on CoinCentral.com
Author: Nick Chong