Yearn.finance (YFI) appears poised for a price correction after rising five days in a row to approach $ 42,000. In particular, the absence of sufficient buying volume coupled with overbought risks are behind the bearish outlook.
YFI’s price rally so far
YFI’s price soared a little over 47% in five days to $ 41,970 as traders rotated capital out of “high-cap” cryptocurrencies like Bitcoin (BTC) and Ether (ETH) and looked for short opportunities. term in the altcoin market.
#DeFi assets are showing some nice signs of growth to kick off 2022. $ YFI, $ UNI, and $ AAVE are all ticking up nicely thus far with the first Monday of the year looking #bullish for several #altcoins. https://t.co/8ujolCvt5z pic.twitter.com/ASpf1dUbtn
– Santiment (@santimentfeed) January 3, 2022
DeFi assets are showing some good signs of growth to start 2022. YFI, UNI, and AAVE are all up very well so far with the first Monday of the year looking to be bullish for various altcoins.
Yearn.finance was one of the beneficiaries of the so-called capital migration, as its value against BTC and ETH rose almost 47% and 41.50%, respectively, in just five days. Meanwhile, at the center of traders’ sudden buying interest in the YFI markets was a token buyback program.
On December 16, the Yearn.finance team announced that it had purchased over $ 7.5 million in YFI tokens on the open market at an average price of USD 26,651 per unit. It also disclosed the existence of $ 45 million in extra cash in its treasury that it would use to continue its YFI buyback program.
In addition, the Yearn.finance community also proposed that the YFI treasury allocate a portion of the token reward to YFI holders who are actively involved in the governance of Yearn. The proposal (you can see all the details here) is currently in the voting phase.
1/8
Since the cat is out of the bag here:
-Yearn has started massively buying back YFI.
-They are revisiting their tokenomics to do a fee distribution to holders, currently looking at veCRV model and xSushi models.
-The ratios are insane. https://t.co/CzuHhbNuhx
– Adam Cochran (@adamscochran) December 16, 2021
Since the cat is out of the bag here:
-Yearn has started to buy back YFI massively.
-They are reviewing their tokenomics to make a distribution of commissions to the holders, they are currently looking at the veCRV model and the xSushi models.
-The proportions are crazy.
YFI’s price soared more than 100% against the US dollar following the announcement of the buyback program.
YFI price correction risks
However, YFI’s trading volume fell despite the rally, suggesting little conviction from traders in its bullish move.
Typically, a bearish divergence between price and volume leads to a correction or consolidation until the conviction increases. Consequently, the likelihood that YFI will at least halt its current price rally is high, with its daily Relative Strength Index also entering its overbought zone above 70, a sell signal.
What’s more, the most recent rally in the price of the Yearn.finance token has brought it closer to a known inflection zone near $ 40,000, as shown through the Fibonacci retracement level in the chart below.
In detail, the 0.618 Fibonacci line near $ 40.113 has been limiting the intraday bullish attempts of the YFI token. The same level was instrumental in stopping the token’s price rally between October and November, which later pushed YFI’s price to its 12-month low near $ 17,000.
However, if the bulls manage to push YFI price above the 0.618 line with determination, they could also pull the token out of its multi-month range defined by about $ 25,500 as support and $ 40,000 as resistance. In that scenario, YFI’s next upside target may move towards the 0.5 Fibonacci line around $ 51,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves a risk, you must do your own research when making a decision.
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