Yearn Finance’s YFI Token Loses Ground After Slashing Over 55% Since ATH

Its attempts for a bullish breakout halted at the level $31,463, where the DeFi token formed a local top. Shortly after this, YFI noted a steady decline in its value that shows no signs of stopping. But why did it drop when its peer tokens have managed to bounce back up? One of the significant contributors to the drop could potentially be the decline in the yields that Yearn.Finance’s Vault product users can make. To an extent, these yields are responsible for the plunging value of YFI primarily because high yields enable the token holders to obtain more fees from user deposits.

CRV’s Inflation could be the reason to blame?

Jason Choi, Founder of TheBlockCrunch podcase weighed in and questioned if Yield farming is over and YFI is on its way to a subsequent demise. He further tweeted that the shift to bearish sentiment has been rapid and added,

“Even “degen” farms offering north of 1500% APY are only attracting ~1/10th of the TVL they did just a month ago.”

According to the exec, the drop in risk appetite and collapse in APY is an outcome of the negative price performance of “new crop tokens”. Talking specifically about YFI’s latest price action, Choi said, that its the inflation of Curve Protocol’s CRV token that has propelled this situation for YFI. In a series of tweets, he connected the dots between the two DeFi protocols and summed up,

“Every buyer at the first peak ($35K) is now underwater based on AVWAP. The more likely reason for correction is continued suppression of APYs in yield farming. CRV is buckling under continual inflation sell pressure, which impacts yCRV APYs on Yearn.finance, and since it accounts for 60% of activity on Yearn, it’s impacting projections for $YFI price.”