Is It Worth Investing in Yearn Finance?
The DeFi industry is growing at a rapid rate. According to recent research published on CoinDesk, the sector is now worth at least $100 billion. This is a huge jump from last year’s valuation of slightly above $50 billion, according to blockchain software technology company, Consensys.
Yearn Finance has quickly positioned itself as a reliable addition to the industry, and it continues to attract attention across the DeFi ecosystem. The next-generation DeFi platform was created to make it easy for investors to earn passive income through their investments and claims to provide the highest annual percentage yields (APY).
The central focus of Yearn Finance is to enhance decentralization by using a combination of technologies that make it one of the most decentralized crypto projects. Although there are several other protocols like Yearn Finance, it has several advantages that make it an easy target for new and veteran investors.
But what exactly is Yearn Finance, and why is it an important player in DeFi and decentralization in general?
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What is Yearn Finance?
Due to its broad use cases, Yearn Finance could be a number of things. You can call it a DeFi platform or a community-driven Robo adviser. However, the protocol is much more than this. Specifically, it is a holistic collection of DeFi protocols based on the Ethereum blockchain that makes it easy for crypto investors to get such services as lending aggregation, insurance and yield generation.
In short, Yearn Finance is not just a single protocol. It is more of a DeFi platform that hosts other protocols that have related functionalities. As a key player in decentralization, Yearn Finance uses blockchain technology to offer its services. This way, it can eliminate intermediaries like banks by incentivising its services using YFI, its native cryptocurrency. The platform is maintained by several independent developers and governed by investors who own the YFI tokens, therefore, allowing for decentralization of all its services.
As the DeFi industry keeps growing, Yearn Finance is expected to be a key player in the decentralization of the finance industry. More than $10 billion worth of assets are currently locked in DeFi, and the numbers are expected to go up in the next few years.
This makes Yearn Finance a crucial target for investors who are looking to reap from the expected success of the DeFi sector.
But before we look at how YFI could be an important investment right now, let’s first understand how it works.
How Does Yearn Finance Work?
As we mentioned, Yearn Finance is trying to champion the quest for decentralization by using a combination of protocols. To do this, the platform capitalization on several individual products that together work to make it painless for investors to earn from their crypto assets. Most of these services are designed to enable users to trade or lend their cryptocurrencies that they are not currently using.
These products include:
- Earn: This is Yearn’s first product. It helps investors identify the highest interest rates that they can earn by lending their assets. So, it’s a lending aggregator that automatically singles out the best rates in the market at all times.
- APY (Annual Percentage Yield): This is some kind of a comparison table that shows interest rates from various lending protocols so users can pick the best deals. Specifically, APY searches all the protocols used by Earn to find such info as how much interest you can earn per annum if you lock a certain amount of capital.
- Vaults: This is a set of investment strategies that investors can use to generate the highest returns when they use different DeFi projects. In other words, Vaults are like staking pools or actively managed mutual funds that can help you generate returns based on the current market opportunities. There are currently more than 10 strategies on Vaults.
- ZAP: This product helps you to combine several trades into a single click and significantly reduce costs and labour. For instance, you can trade DAI for yCRV in a single click instead of switching between Yearn Finance and Curve, which might require up to three actions. This way, you not only save on time but also transaction fees and opportunity cost.
- Cover. This is simply insurance that makes it easy for investors to get coverage if they lose their finances on the various protocols running on the Ethereum network.
The majority of the services on the Yearn Finance platform centres around what is called yield farming. This is where crypto investors can lock up their assets in a DeFi project to generate interest instead of merely stashing them in a cold wallet.
This interest usually comes in the form of additional cryptocurrencies and allows users to maximize their income. So, generally, the more crypto you lock up, the more you stand to earn.
This yield farming model has proved to be effective for Yearn Finance which recorded more than $800 million worth of tokens locked in its protocol in its first month.
Read Also: Why Yearn.Finance Is Going To Explode
What Exactly is the YFI Token?
When we talk about investing in Yearn Finance, we are referring more to the YFI token than the protocol itself. So, what exactly is YFI, and why is it currently trading at a higher price than Bitcoin?
First, to put things into perspective, YFI is Yearn’s native/governance token and is currently trading at more than $43,000, while Bitcoin is trading at slightly above $36,000. Why is that, and why is YFI not the world’s biggest cryptocurrency? For once, YFI is more of a DeFi protocol than a cryptocurrency. Secondly, YFI has a low market capitalization of $1.6 billion compared to Bitcoin’s $675 billion.
Another reason why the YFI price is so high is that there are only 30,000 YFI tokens in circulation. As a result, the demand is more than supply causing the price to shoot up.
The low number of tokens is also the cause of the low market cap (Bitcoin has 21 million coins). According to the Year Finance whitepaper, more of these tokens can be mined by governance. However, Tarun Chitra, who is among Yearn’s nine-person multisig, says that this will unlikely happen.
So, if you need the YFI token, you will just have to buy it as opposed to mining.
The YFI tokens are mostly used for governance purposes on the Yearn Finance platform. So, to be part of the governing members, you’ll need to stake your YFI tokens.
Yearn Finance Price History
Yearn Finance was launched in July 2020, so we don’t have a lot of price data to work with. However, since the protocol has created a lot of buzzes, there has been a dramatic price movement to warrant an interesting history.
Unlike most tokens, YFI started trading at a fairly high price. When it entered the market in July, it sold for more than $1,000 per token. For instance, based on price data from CoinMarketCap, YFI was selling at $1,200 on July 21st 2020.
This price quickly went up, and by August, it had reached $4,000. The most dramatic rise happened between August 15th and 20th, when the price jumped from $4253.89 to as high as $15,839, representing a 272% increase in just five days. This was the token’s first major price surge.
Naturally, in a crypto market, this would have been followed by a correction or a slight drop. However, FYI kept going up, and by the end of August, it was trading at more than $33,000. That is roughly a 3,200% increase a month after it started trading. At around the same time, Bitcoin was trading at slightly above $10,000, making YFI more than three times pricier than it.
In mid-September, YFI crossed the $40,000 mark and went as high as $42,000. However, after that, it started dropping gradually, and in early November, it went below $8,000. Surprisingly, YFI didn’t suffer for long from the bearish adjustment.
You will remember that there was a market-wide bull run in late 2020 and early 2021 that saw most crypto prices shoot up. YFI took this opportunity to redeem itself and soon began rising again. While there were a few brief bearish actions along the way, the uptrend was stable, and by the end of 2020, YFI was trading at above $20,000 again.
The real bull run, however, started in January 2021. On 1st January, YFI was trading at $22, 259.85 according to CoinMarketCap. About a week later, the price went above $30,000, again pitting it against Bitcoin, which was trading at around the same price at the time.
YFI then stagnated until February 10th. On February 12th, the token almost hit the $50,000 mark and was again more expensive than Bitcoin. Between March and April, it bounced from $30,000 to $49,000, then went to $50,000 on May 1st.
A lot of the price hikes happened in May. For instance, between May 8th and YFI jumped from $53,000 on May 8th to attain its current all-time high price of over $88,00 on May 12th. This was after the token’s price increased by more than $30,000 in just two days.
The bull run was short-lived, and soon, YFI was tumbling again. This came after Tesla CEO Elon Musk announced that his company would no longer be accepting Bitcoin for car purchases. Like most cryptocurrencies, YFI was affected, and on 23rd May 2021, it dropped to $28,914.05. This was its lowest price for 2021.
Although the token started rising again after the crypto market had recovered from Musk’s announcement, it has not gone above $50,000 again. At the time of writing, Yearn Finance was trading at slightly above $43,000, according to CoinMarketCap.
Yearn Finance Price Prediction for 2021-2025
Yearn Finance has already gone higher than any other cryptocurrency in terms of price, so clearly, its period prospect is bright. However, despite the high price, YFI currently has a market cap of about $1.6 billion, which makes it the world’s 61st biggest cryptocurrency, according to crypto data tracker, CoinMarketCap.
The comparison between price and market capitalization often confuses investors, but as we mentioned, the low market cap is due to the low number of YFI tokens.
So, how will Yearn Finance perform going forward, will it be able to beat its highest price before the end of the year?
According to Long Forecast, that is unlikely. In fact, the price analyst believes that YFI will drop to as low as $22,586 in August 2021 then close the year at $40,000 after a gradual month-to-month increase. Long Forecast predicts that Yearn Finance will only go above $80,000 again in the last three months of 2023, then again in 2025, where it will trade at as high as $102,382 in July 2025.
Although Digital Coin Price also doesn’t think YFI will reach its all-time high this year, it is a bit more optimistic than Long Forecast. According to the site, the DeFi token will close 2021 at $64,975.15. Just like Long Forecast, however, DCP also predicts that Yearn Finance will reach its ATh price again in 2023. But by 2025, the price will have crossed $125,000.
Wallet Investor offers an even more optimistic forecast for this year. The price analyst predicts that Yearn Finance will trade at $71,216.20 or a yearly high of $81,123 by the end of December 2021. The token will see a gradual increase throughout the years then towards the end of 2022, it will go beyond $100,000.
Wallet Investor predicts that Yearn Finance YFI might reach $200,00 in 2025 and close the year at above $264,000. Compared to the other predictions, Wallet Investor’s seem overly bullish. However, given Yearn Finance’s price history, it won’t be much of a surprise if the token adopts this parabolic trajectory.
The most optimistic forecast for 2021 comes from CoinPrice Forecast, which believes that Yearn Finance YFI will go above $90,000 by the end of the year. This is the only prediction we have seen that indicates the token will surpass its current ATH by the end of 2021.
If Yearn Finance picks up momentum, this prediction might come to pass. The token has previously achieved unimaginable milestones in a matter of months, so we think there is a lot that can happen in the next 6 months.
Don't Miss: Yearn Finance Price Predictions
How to Invest in Yearn Finance
If, after looking at the technical analysis, you still believe Yearn Finance will make a good addition to your portfolio, there are several ways you can invest in it. These include:
- Investing in Yearn Finance products
If you are going to trade or hodl, you will first need to buy the token. We find eToro to be the best broker for buying YFI.
How to Buy Yearn Finance Coin on eToro
- Create an online account on eToro by providing some personal info like an email address.
- Verify your identity. Most countries require brokers to verify customer identities. For instance, if you are in the UK, you will be required by the UK Financial Conduct Authority (FCA) to verify your identity before you can buy crypto on eToro.
- Deposit a minimum of $200 into your account using bank transfer, credit card, PayPal, debit card, Neteller or Skrill.
- Search for Yearn Finance on eToro and click ‘Trade’
- Enter the amount you want to use, set the required parameters then click “Open Trade’ to buy the tokens.
Now let’s look at the different ways to invest in Yearn Finance
Method 1: Hodling
Hodling is holding crypto for a long period of time so that you can sell when the price is very high. Due to its highly limited supply, YFI is one of the best assets to HODL. It is expected that YFI will cross to $100,000 next year and as high as $200,000 in the next two years.
For this reason, the token could earn a lot of profit in a short period of time. The best part is, instead of hodling your tokens in a wallet, you can lock them in the Yearn Finance protocol, so it earns some interest. This will help maximize your earnings as you also profit from the price surge.
However, if you are still worried about security issues, you can just store your tokens in a hardware wallet.
Method 2: Trade
Trading allows you to take advantage of both price rise and falls.
If you have already created an account with eToro, you can easily start trading YFI.
Here is how:
- Head over to the eToro website
- Click on Top Markets, then choose Cryptocurrencies
- Look for YFI and click on it
- Click on the ‘Trade’ button, then follow the prompts to start trading
Method 3: Invest in Yearn DeFi Products
The third and rarely explored way to invest in Yearn is by investing in the DeFi projects hosted on its platform. In most cases, the growth of these projects is proportional to that of the platform. So, as Yearn Finance becomes more valuable, so will the best of these projects.
We only recommend this method if you are experienced in mainstream investments or just don’t want to deal directly with the YFI token.
Is Yearn Finance a Good Investment?
As we have seen, there are a lot of positive prospects for Yearn Finance this year. At the current price of more than $45,000, YFI is one of the most valuable assets in the crypto market.
According to cryptoanalysis tool cointobuy.io, YFI investment currently has a 4.5/10 safety rank. The tool predicts that if the price of YFI goes above $75,000, it will have a more than 74.2% return.
Crypto investment analysts use several ranking factors to determine how good of an investment Yearn Finance can be. These factors include the number of exchanges that support YFI, the volume ratio, market capitalization, 24-hour price action, social following and other minor factors like Google trends and Twitter citation.
If you want a more in-depth analysis before adding YFI to your portfolio, you will want to closely watch these factors. Lucky for you, most of these factors are displayed on CoinMarketCap, so you won’t be doing a lot of digging.
Overall, we think Yearn Finance can be a great investment if the price keeps rising this year.
Aside from the metrics for the factors we have mentioned above, several other things make YFI a good investment. For starters, it offers multiple earning streams in the form of the products we mentioned at the start. These include Vaults, Earn, Zap, Cover and so on.
Yearn Finance is also expected to be a big part of the DeFi arena, and this could potentially make it very valuable. The protocol is continuously innovating and attracting more users, which consequently increases its use cases and valuation.
The severely limited supply of Yearn Finance also makes it a hot investment, especially for speculative investors. However, don’t forget that YFI, like any other crypto assets, is risky, and you might lose all your investments.
Conclusion: So, Should I Buy Yearn Finance?
Yearn Finance has a very limited supply. So, if you are a speculative investor, this would be a great time to buy. The low supply means that there is a high demand for YFI, which consequently drives the price upwards.
In fact, compared to Bitcoin, YFI has better token dynamics since the supply is way lower. That is why the token was able to shoot to over $80,000 in a few months. In the next few years, assuming the DeFi industry sticks to the current growth trajectory, Yearn Finance will likely trade at hundreds of thousands of dollars.
So, you are looking at a potentially highly profitable token here.
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Here are some frequently asked questions about Yearn Finance and YFI investments
Why Does YFI Have Value?
YFI has value because it is the native cryptocurrency that governs the Yearn Finance protocol. It is also used to incentivise actions on the protocol, such as voting and paid out to users as interest.
Is Yearn Finance Safe?
Yearn Finance is one of the safest DeFi protocols in the market today. The creator of the platform, Cronje, guarantees this safety by locking his own funds in the system.
What will Yearn Finance be Worth in 2021?
According to most price predictions, YFI might be worth between $60,000 and $90,000 by the end of 2021. Of course, there will be some fluctuations, and the predictions will change, but for now, we believe this range is feasible enough.