Yearn.finance (YFI), the decentralized finance (DeFi) darling that led the DeFi market upsurge in the third quarter, is stagnating. Technical analysts are now considering the worst possible scenario for the DeFi giant.
A pseudonymous DeFi trader known as Aaron, who created Tokenviz, says YFI is currently sitting on a major support area.
“Here’s my worst case bear scenario for $YFI/ $ETH. Price is sitting right on critical support with a lot of open air below. If 35 ETH gives then 17 ETH is next major support. This is not necessarily isolated to $YFI as #DeFi price action is looking bearish across the board,” the trader said.
If YFI drops further, the trader said it is vulnerable to a potential drop to 17.2 ETH. At the current Ethereum price of $377, that would be sub-$7,000.
The daily chart of Yearn.finance (YFI). Source: YFIUSDT on TradingView.com
Overall Sentiment Around YFI is Improving, Could It Offset Technical Weakness?
The general sentiment around Yearn.finance has improved in recent weeks. Andre Cronje, the deployer of YFI, has become less active, which led the developer community to become more operational.
The trader previously said the YFI market is maturing as a result, which might benefit the growth trajectory of the project. He said:
“I have seen some bullish maturing in the $YFI market: 1) The hypersensitive $YFI market is becoming desensitized to sensationalist news. 2) The market is finally accepting that @iearnfinance is not a corp. and Andre is not its CEO 3) Kirby is gone.”
Atop the lower dependence on Cronje, which could be a positive factor for long-term growth, Yearn.finance approaches product launches.
On October 16, the Yearn.finance developer community said it is testing Yearn v2 vaults on the Ropsten testnet. Yearn.finance vaults have been the most popular product of the DeFi protocol, which allows users to earn yields by storing their funds in the vaults.
“On-going testing (on Ropsten) of Yearn v2 vaults. We are testing the ability for a single vault to simultaneously fund 3 different strategies,” the Yearn.finance team said.
Whether the maturing YFI community and the launch of new products could prevent another major correction largely depends on the DeFi market sentiment.
DeFi Market Remains Vulnerable
Currently, the DeFi market and major altcoins are lagging behind Bitcoin. When Bitcoin rises, DeFi tokens and altcoins stagnate. When BTC falls, they fall in tandem, so the entire altcoin market is in a vulnerable position.
Although there are potentially positive catalysts that could trigger a YFI recovery, the pessimistic market dynamics for altcoins make it more difficult for YFI to rebound.
Over the past 48 hours, the dominance of Bitcoin over the cryptocurrency market, both in terms of valuation and trading activity, has significantly grown. For large-cap DeFI tokens, this complicates the road towards recovery.