While euphoria was palpable on the cryptocurrency market, investors may have been surprised by the recent performance of Yearn Finance’s YFI: a 45% drop in the space of just a few hours. What happened? We explain.
YFI share price plummets
While the return of volatility to the cryptocurrency market may have delighted some investors, others certainly woke up with headaches this morning when they opened their wallets. Indeed, the Yearn Finance (YFI) share price has plummeted by over 45% in the space of just a few hours.
A performance that stands out from the rest of the market, with Bitcoin (BTC) down just 0.67% over the same period.
YFI price fall in 1H time scale
Since the beginning of November, Yearn Finance’s YFI had put in a spectacular 181% performance. In particular, between November 7 and November 17, the token on the decentralized finance platform enjoyed 10 consecutive days in the green, rising from $5,900 to over $15,000.
Although a correction is often expected after such bullish rallies, a drop of almost half in the price of an asset is not insignificant. And inevitably, many investors have been looking into the matter to determine the causes of this fall.
An expected and predicted fall
For the time being, the community is giving priority to the idea of an insider movement. As explained on the X account of Lookonchain, a team that analyzes blockchain fund movements, large wallets were reported to have sold their YFI tokens some time before the fall:
Why did $YFI suddenly plummet more than 40%?
Wallet “0x48f9” transferred 446 $YFI($5.8M) out, most of which was deposited to exchanges.https://t.co/Scw2wsE7lK pic.twitter.com/mrikh2dviO
– Lookonchain (@lookonchain) November 18, 2023
A theory that seems to be reinforced by the way tokens are distributed among investors. According to Coinglass data, around 50% of all YFI in circulation are held by just 10 wallets. Although some of these belong to centralized exchange platforms, the YFI price is nevertheless threatened by the movements of certain whales.
That said, if we look at the timings, the various portfolios have not targeted their sales particularly well. For example, the portfolio singled out by the community sold around 96 YFIs for $1.23 million at a price of around $12,800 each, after a 13% fall in the price, which is not illogical.
In any case, this recent move on YFI resulted in $5 million in liquidations on upward positions, and a further $4 million in liquidations on downward positions, meaning that some investors were too greedy in their attempts to profit from this fall.
In all likelihood, it was a combination of a lack of market depth, massive selling of large portfolios and cascading liquidations that led to the spectacular fall in Yearn Finance’s YFI.
