YFI coin has risen sharply recently. Since its landing on the Huobi trading platform on August 23, the price of the coin has soared. It once reached 40,000 US dollars, and now it has fallen back to around 34,000 US dollars. Although 2020 is the year of the outbreak of DeFi, the increase of several hundred times is amazing. Now the price of a YFI is approximately equal to the price of 3 bitcoins. The increase of mainstream currencies under YFI is dwarfed. Then, YFI What is it? Why does its price soar so much in the short term? Will there be a bubble behind the YFI price surge?
What is YFI?
Before understanding what YFI is, we must first understand what an aggregator is.The aggregator is a platform for aggregating the liquidity of various companies. For example, Exchange A has 10,000 BTC buy orders and Exchange B has 10,000 BTC sell orders. Then the aggregator gathers all these together to facilitate transactions.yearn.finance is a decentralized lending aggregator, which standardizes the interest on decentralized lending platforms and helps users to earn money on the platform with the highest interest rate.
On July 17, Andre Cronje, the founder of iEarn, announced the launch of yearn.finance and released the governance token YFI.YFI token holders can use their tokens to vote on network upgrade proposals, and can make money by depositing cash in yEarn (a so-called DeFi revenue mining application).But the founder, Andre Cronje, publicly stated: “YFI is a token with no financial value and zero supply. No pre-mining, no crowdfunding, no team allocation, no investment institutions reserved, and fully adopts online governance model. , Its destiny and direction are determined entirely by community governance.”At the very beginning, when YFI joined the Balancer liquidity pool, the price was about US$3, but in just one week, the highest price of YFI reached US$4,500, a maximum increase of 1500 times.
Why can the price of YFI be so high?
The total issuance of YFI is only 30,000, which can be said to be very scarce. The unit price is so high now that it is actually acceptable as the total value.But we must first figure out what is the meaning of holding YFI? What is the role of the token itself? This is the case. Yearn provides users with three fund pools and allocates a part of YFI tokens to each fund pool. Users will receive YFI rewards while providing liquidity to these pools, with an initial total of 30,000.
Yearn’s selection mechanism makes its pledge income perform well. As the number of miners continues to increase, the funds in the pool will rise.The prerequisite for participating in some high-yield pools is to pledge YFI. Many miners go to the secondary market to purchase YFI to pledge to obtain tickets.Benefit induction is added to the pure supply and demand relationship, and the price of YFI and the volume of the liquidity pool have obtained a positive cycle, and this has led to the sky-high price of YFI as high as 44,000 US dollars.
At present, most of the bargaining chips are mainly concentrated in governance voting and liquidity betting, which has further caused the extreme scarcity of the total secondary market.Therefore, the secondary market price is very prone to large fluctuations.As far as the total market value is concerned, the current price is relatively reasonable, and the YFI price is also out of a healthy callback trend in the short term, releasing a certain short-term profit. The follow-up does not rule out the possibility of further pulling up.
What is YFII, is it a twin brother?
After marveling at YFI’s hundreds of times increase in 40 days, YFII coin turned out again.Is everything in the DeFi world changing so fast? YFI token hasn’t figured it out yet, and another YFII token has come.
In fact, YFII is a fork of YFI, just like BTC has BCH and BSV.Since YFI stopped mining on July 26, in order to prevent the large-scale withdrawal of liquidity from mining, the community proposed an additional issuance proposal, but the final proposal did not take effect.YFII was born as a fork and adopts an additional issuance mechanism similar to Bitcoin’s halving to make mining sustainable.
Is there a huge bubble behind the boom?
2020 has been so long, and the price trends of mainstream currencies such as BTC and ETH are always half-dead. Although BTC successfully emerged from the 3.12 plunge, it has never reached a new high. Is it possible that DeFi tokens will redefine mainstream currencies? The concept?As a relatively immature new thing, DeFi currently has a lot of room for improvement, but its development and the increase in tokens are indeed incredible.But facing such an unreal increase, the founder Andre Cronje was disappointed. He said that his expectation of YFI was actually only $3, and he did not want the market to increase the price of YFI, otherwise the market would be controlled by speculative sentiment.
Judging from the current situation, there are three factors that have caused the YFI price to be so high:
- The total issuance of YFI: The total issuance of YFI is only 30,000, far less than the 21 million Bitcoins. The scarcity of issuance has led to short supply, and short supply is the general law of price increases. The small issuance of YFI obviously helps to increase people’s psychological expectations of coin prices.
- YFI belongs to a clear stream of the DeFi community: YFI has no team shares, no private, public offerings, no pre-mining, and even the founder Cronje may not have many tokens himself, and can only obtain tokens by providing liquidity for the mining pool. The currency method is very friendly to retail investors.
- The popularity of DeFi remains high, especially in the decentralized trading platform. Take Uniswap as an example. Its platform transaction volume has exceeded 1.1 billion US dollars this week, indicating that there are real users using this platform. DeFi is a new thing, there will be room for explosive growth.FOMO sentiment is notoriously high, and it can be said that this wave of rise cannot be ruled out as being driven by market sentiment. The YFI token itself is valuable, but now its price seems to be far away from its reasonable valuation range, and is driven by speculative sentiment. If you really want to enter the market, it is recommended to wait until the price drops to a reasonable range before entering the market. Not too late, don’t chase high.