First Mover: Rookie YFI Token Jumped 8-Fold in August as DeFi Dominated

Markets

1 September 2020

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Price Point

Bitcoin (BTC) was up 2.2% early Tuesday, starting off September on a strong note after an anemic performance last month. The dollar dropped to a two-year low against major trading partners’ currencies.

The largest cryptocurrency climbed 2.6% in August, underperforming the 25% gain notched by the second-biggest cryptocurrency, ether (ETH).

For a comparison with traditional markets, the Standard & Poor’s 500 climbed 7% during the month, the best August since 1986. And gold, which garnered headlines when it pushed to a new record price above $2,000 an ounce, ended the month down 0.4%.

Market Moves

Bitcoin? Yawn. In August, the hottest returns for crypto traders came from the fast-expanding and often brain-exploding realm of decentralized finance, known as DeFi.

Among digital assets with a market capitalization of at least $1 billion, the just-released-last-month yearn.finance (YFI) token jumped eight-fold to claim the top spot. UMA (UMA), a trustless financial-contracts platform, rose five-fold, according to the data firm Messari.

Chainlink, an “oracle” protocol that provides price feeds for DeFi platforms, saw its LINK tokens double during the month. Ether (ETH), the native token of the Ethereum blockchain, upon which most DeFi applications are built atop, surged 87% in August, leaving prices more than triple where they started the year.

Obscure Ethereum-oriented tokens are overtaking “competitors which dominated the leaderboard a few years ago,” the data firm Glassnode wrote Monday in a report. “The innovation network around DeFi means that there is a constant source of new and lucrative financial games to play, while Bitcoin has seen little growth in terms of its value proposition or ecosystem.”

fm-9-1-chart-1-yfi-vs-btc — YFI price chart versus LINK, bitcoin and ether.

John Willock, CEO of digital-asset liquidity firm Tritum, told CoinDesk’s Daniel Cawrey on Monday that “this looks like a perfect storm of high optimism for these protocols and recent innovations introduced that are proving they have long-term value.” The decentralized exchange Uniswap boasted a trading volume of $560 million on Sunday, exceeding that of the big cryptocurrency exchange Coinbase, Cawrey reported.

“There is no denying that DeFi is a thing,” said George Clayton, managing partner at Cryptanalysis Capital.

Some of the DeFi projects, with names like Yam and Spaghetti, might be dismissed as flukes or gimmicks if there weren’t so many millions, hundreds of millions or even billions of dollars flowing in and out of them.

In July, when the YFI token went live, Yearn.Finance’s creator, Andre Cronje, described it as “completely valueless.”

In the words of CoinDesk’s Brady Dale in an article Monday: “DeFi has made a pivot to what might be called Weird DeFi: a set of difficult-to-parse projects whose larger value to the ecosystem is suspect at best and whose community is at least 20% driven by inside jokes.”

None other than BitMEX CEO Arthur Hayes acknowledged in a monthly newsletter on Aug. 27 that he was “yield-farming” – using DeFi projects to earn token rewards – since the local nightclubs are currently closed.

“While I deride many of these projects as activity resulting in economic waste, there is an underlying proto-banking infrastructure that is being built on the rails of Ethereum and other protocols,” Hayes wrote. “Crypto capital markets are the best place to earn serious positive yields if you are willing to take some modicum of risk.”

Hayes added that he fully expects to “lose most of all the money I ‘invest’ into any of these projects,” but that he views the “destruction” of his own capital as the “only way to learn.”

When he figures it out, maybe he can explain to everyone else why YFI octupled in August.

screen-shot-2020-08-31-at-4-51-29-pm — August performance rankings for digital assets with a market capitalization of at least $1 billion.

Bitcoin Watch

download-7-33 — Bitcoin and ether daily charts.

Bitcoin is closing on a breakout above $12,000 amid ether’s price rally to fresh two-year highs.

The top cryptocurrency’s options market shows increased demand for call options (bullish bets) at $12,000 strike. This signifies a more bullish move in the short-term, according to Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds.

“From a macro level, the U.S. dollar has continued to fall since Jackson Hole, creating further buying pressure on bitcoin and broader safe haven commodities such as gold,” Dibb told CoinDesk in a WhatsApp chat.

Meanwhile, ether’s price rally looks to have legs as exchange deposits have declined to the lowest level since March, a sign of investors shifting to long-term holding strategies.

– Omkar Godbole

Token Watch

Ether (ETH): Price hits two-year high as exchange deposits decline, seen as a bullish sign.

Tezos (XTZ): Foundation and founders agree to pay $25 million to settle case over 2017 initial coin offering.

SushiSwap (SUSHI): Decentralized exchange aims to take liquidity from rival Uniswap by introducing a token that entitles holders to a share of trading fees. The token is also getting a listing on Binance, the world’s biggest (centralized) cryptocurrency exchange.

Cardano (ADA): The Daedalus wallet upgrade sees staking and delegation improvements among other enhancements.