Since its peak on September 13 at $43,390, YFI crashed more than 50% to as low as $21,640. Since its bottom on September 21, YFI surged by 13% to $24,500, posting a solid recovery.
Following YFI’s lead, other DeFi tokens recorded 10% to 20% gains in the last 12 hours.
UNI, in particular, climbed by nearly 20% within a four-hour span, the spot market stabilized and futures contracts neutralized.
On-chain indicators reveal that DeFi tokens, especially YFI, are heavily oversold. According to the pseudonymous trader known as “Byzantine General,” YFI has never been this oversold since its listing on major crypto exchange, Binance, on August 11.
The market seems to be reacting to the strong recovery of DeFi tokens in the last 3 days. Following YFI’s 10% recovery at a critical support area, UNI and SNX both surged in tandem.
What happens next to Yearn.finance and Ethereum?
Because of the sheer intensity of the rally of DeFi tokens, a pullback was expected by analysts. The magnitude of the recent correction surprised many users, but it was necessary to neutralize the markets.
The correction also coincided with the end of a minor DeFi cycle. Primitive Crypto founding partner Dovey Wan said: “UNI airdrop is the last drop of the unsustainable money printing in Defi world. Others were simply selling unrealistic story of Uni killer for an over-expected token price via noobs market buy. When Uni slayed them, it’s when all are back to the natural process of hype cycle.”
As such, a pullback at the time DeFi tokens plunged was healthy, as long as another major drop does not take place.
Prior to the crash, a cryptocurrency trader known as “Flood” claimed that an ETH drop below $350 would cause another 20% drop for DeFi tokens. The DeFi market is coming off a large crash within a short period, raising the probability of a strong recovery.
The on-chain market data provider Santiment said that the fundamentals of Ethereum remain strong too. For DeFi tokens, the resilience of Ethereum would provide a favorable backdrop for recovery.
The researchers at Santiment explained that non-exchange addresses on Ethereum are not slowing down. They said: “The top 100 Ethereum non-exchange addresses are not slowing down one bit on their accumulation. Santiment data indicates these whales now hold 26.22M ETH combined, a +20.61% increase in cumulative holdings, compared to 21.74M held 2 months ago.”
The data shows that both Ethereum and DeFi tokens seem to be recovering simultaneously, backed by oversold indicators and growing user activity.