Read on Twitter
1/ First let's set the stage: August has been a phenomenal month for DeFi bulls.
Now we're in the hangover phase of the DeFi party, with the DeFi perp on @FTX_Official pretty much completely retracing the August froth back to square one.
Now we're in the hangover phase of the DeFi party, with the DeFi perp on @FTX_Official pretty much completely retracing the August froth back to square one.
2/ Amidst the rout, there's clear signs of flight to quality in yield farming.
Despite the modest returns of "only" 20-30% APY, Uniswap accounts for ~70% of all TVL in yield farms even as a new farm.
Despite the modest returns of "only" 20-30% APY, Uniswap accounts for ~70% of all TVL in yield farms even as a new farm.
3/ Side note: given the most prolific farmers used @UniswapProtocol to dump their crops, the cool off in farming did have an impact on Uniswap volumes, but only marginally.
Uniswap is still processing 2-3x daily volumes compared to 2 months ago and owns 70%+ of dex market (!)
Uniswap is still processing 2-3x daily volumes compared to 2 months ago and owns 70%+ of dex market (!)
4/ Back to farming: the shift in sentiment was rapid.
Even "degen" farms offering north of 1500% APY are only attracting ~1/10th of the TVL they did just a month ago.
Even "degen" farms offering north of 1500% APY are only attracting ~1/10th of the TVL they did just a month ago.
5/ The drop is risk appetite and collapse in APY is a direct result of -ve price performance of new crop tokens.
Past 7 days alone:
- Basket of 84 top DeFi tokens fell by a median of 14%
- Basket of 33 yield farming tokens fell by 33%, more than double
Past 7 days alone:
- Basket of 84 top DeFi tokens fell by a median of 14%
- Basket of 33 yield farming tokens fell by 33%, more than double
6/ An easier way to visualize this - $YFI.
The poster boy of the yield farming craze, $YFI has been facing its 8th consecutive day of selling following a spectacular 1400% run within a month.
Every buyer at the first peak ($35K) is now underwater based on AVWAP.
The poster boy of the yield farming craze, $YFI has been facing its 8th consecutive day of selling following a spectacular 1400% run within a month.
Every buyer at the first peak ($35K) is now underwater based on AVWAP.
7/ Some on Twitter attribute this to @bluekirbyfi moving his funds/ Eminence degeneracy...but pikers will always try to find someone to blame when prices go down 
More likely reason for correction is continued suppression of APYs in yield farming.
Let's take a look...
More likely reason for correction is continued suppression of APYs in yield farming.
Let's take a look...
8/ As the DeFi roboadvisor, @iearnfinance offers 9 vaults - or collections of automated strategies - to make users money.
Today, ~60% of assets on yearn are locked in the yCRV vault.
What does that mean?
Today, ~60% of assets on yearn are locked in the yCRV vault.
What does that mean?
9/ That means the $220M in capital is deployed to the stablecoin pool (yPool) on @CurveFinance.
It farms $CRV with your stablecoins, dumps $CRV for more stablecoins, and thus generate a USD-denominated yield.
You can see the strategy live here: https://etherscan.io/address/0xc999fb87AcA383A63D804A575396F65A55aa5aC8#tokentxns
It farms $CRV with your stablecoins, dumps $CRV for more stablecoins, and thus generate a USD-denominated yield.
You can see the strategy live here: https://etherscan.io/address/0xc999fb87AcA383A63D804A575396F65A55aa5aC8#tokentxns
10/ Some back of the envelope math:
Currently the yCRV vault ($220M) accounts for roughly 40% ($589M) of the TVL of the y pool.
The y pool in turn accounts for 48% of the total TVL ($1.22B) on Curve.
i.e. @iearnfinance is earning + selling ~20% of all $CRV rewards daily.
Currently the yCRV vault ($220M) accounts for roughly 40% ($589M) of the TVL of the y pool.
The y pool in turn accounts for 48% of the total TVL ($1.22B) on Curve.
i.e. @iearnfinance is earning + selling ~20% of all $CRV rewards daily.
11/ The bigger point here is that a higher $CRV price benefits @iearnfinance APYs, and hence revenues + $YFI price...as long as yCRV vault remains a dominant strategy.
But the bigger the yCRV vault gets, the more sell pressure there is for $CRV...
But the bigger the yCRV vault gets, the more sell pressure there is for $CRV...
12/ Moreover, the outlook for $CRV is shit.
As I have stated since the launch of the token, @CurveFinance is a phenomenal product, one that I love and use personally.
But given the insane inflation, hard not to be bearish $CRV. https://twitter.com/lawmaster/status/1295103619101069313?s=20
As I have stated since the launch of the token, @CurveFinance is a phenomenal product, one that I love and use personally.
But given the insane inflation, hard not to be bearish $CRV. https://twitter.com/lawmaster/status/1295103619101069313?s=20
13/ tl;dr so far - $CRV is buckling under continual inflation sell pressure, which impacts yCRV APYs on @iearnfinance, and since it accounts for 60% of activity on Yearn, it's impacting projections for $YFI price...
So now what?
So now what?
14/ Imo, the key questions for $YFI bulls now are:
- Can @iearnfinance meaningfully diversify away from $CRV?
- Can @iearnfinance innovate to beyond simply yield farming strategies?
- Can $YFI capture revenue streams from new strategies?
My prediction: yes, yes and yes.
- Can @iearnfinance meaningfully diversify away from $CRV?
- Can @iearnfinance innovate to beyond simply yield farming strategies?
- Can $YFI capture revenue streams from new strategies?
My prediction: yes, yes and yes.
15/ On the first point, the biggest catalyst for @iearnfinance currently is the launch of new vaults and strategies - which will ideally diversify away from @CurveFinance-dependent strats.
In fact, anyone will be able to submit a strategy. https://twitter.com/fubuloubu/status/1311735846412967938?s=20
In fact, anyone will be able to submit a strategy. https://twitter.com/fubuloubu/status/1311735846412967938?s=20
16/ Second, @iearnfinance is not "the yield farming index".
It is a bet on DeFi markets.
More specifically, I see it as a capital allocator. Farming strat is one, but once you have deposits you can deploy it anywhere (e.g. keeper + arb strats?)
Their R&D docs...
It is a bet on DeFi markets.
More specifically, I see it as a capital allocator. Farming strat is one, but once you have deposits you can deploy it anywhere (e.g. keeper + arb strats?)
Their R&D docs...
17/ As an aside, @iam__vance summed this up succinctly from a higher level https://twitter.com/iam__vance/status/1288508930771968000?s=20
18/ Third - on value accrual - is up to the community.
$YFI holders can seek to capture value from future @iearnfinance affiliated projects - StableCredit, Snowswap, Eminence etc. - from fee split/ airdrops.
I expect a mixture of both to create diversified revenue streams.
$YFI holders can seek to capture value from future @iearnfinance affiliated projects - StableCredit, Snowswap, Eminence etc. - from fee split/ airdrops.
I expect a mixture of both to create diversified revenue streams.
19/ Final point: the prevailing perception that @iearnfinance is @AndreCronjeTech's 1-man-show and valuation is only because of the "Dre premium" ....is wrong.
Yearn team is 20 person strong, not counting community organizers like @bluekirbyfi https://twitter.com/iearnfinance/status/1302888876302913536
Yearn team is 20 person strong, not counting community organizers like @bluekirbyfi https://twitter.com/iearnfinance/status/1302888876302913536
20/ I don't call bottoms, but my take:
Macro is uncertain (for every asset). YFI dump sucks. Part of that is because of $CRV price. But Yearn has plans to diversify out of yCRV. Team has grown 20x in 3 months. New products are coming.
Bullish $YFI
Macro is uncertain (for every asset). YFI dump sucks. Part of that is because of $CRV price. But Yearn has plans to diversify out of yCRV. Team has grown 20x in 3 months. New products are coming.
Bullish $YFI
It's 1:30 am so I probably got some stuff wrong, but welcome all feedback from my big brain friends @santiagoroel @Darrenlautf @Rewkang @Arthur_0x @HassanBassiri @QwQiao
