Financing year (AND FI) appears to be poised for a price correction after rising five days in a row to approach $ 42,000. In particular, the absence of sufficient buying volume coupled with overbought risks is behind the bearish outlook.
YFI's price rally so far
YFI Price surged just over 47% in five days to $ 41,970 as traders rotated capital from "top-cap" cryptocurrencies like Bitcoin (BTC) and ether (ETH) and looked for short-term opportunities in the altcoin market.
#DeFi Assets are showing good signs of growth to start 2022. $ YFI, $ UNI, Y AAVE they are progressing very well so far with the first Monday of the year looking #bullish For several #altcoins. https://t.co/8ujolCvt5z pic.twitter.com/ASpf1dUbtn
- Santiment (@santimentfeed) January 3, 2022
Yearn.finance was one of the beneficiaries of the so-called capital migration, given that its value against BTC and ETH rose almost 47% and 41.50%, respectively, in just five days. Meanwhile, at the core of the sudden purchase of interest in YFI markets it was a token buyback program.
On December 16, the Yearn.finance team announced that it had bought over $ 7.5 million in YFI tokens from the open market at an average price of $ 26,651 per unit. He also revealed $ 45 million in extra cash in his treasury that he would use to continue his YFI buyback spree.
Additionally, the Yearn.finance community also proposed that the YFI treasury direct a portion of the token buyback to reward YFI holders who are actively involved in Yearn Governance. The proposal (full details here) is currently in the voting phase.
1/8
Since the cat is out of the bag here:
-Yearn has started to buy back YFI massively.
-They are reviewing their tokenomics to make a distribution of fees to the holders, and are currently looking at the veCRV model and the xSushi models.
-The proportions are crazy. https://t.co/CzuHhbNuhx
- Adam Cochran (@adamscochran) December 16, 2021
YFI's price surged more than 100% against the US dollar after the token buyback announcement.
YFI price correction risks
However, YFI's trading volume fell despite the rally, suggesting low conviction among traders in its bullish move.
Typically a bearish divergence between price and volume leads to a correction or consolidation until conviction increases. As a result, the probability that YFI will at least pause its ongoing price rise is high, and its daily Relative Strength Index also enters its overbought zone above 70, a sell signal.
Related: YFI price gains 46% in just four days after Yearn.finance's $ 7.5M buyback
Furthermore, the latest price rally for the Yearn.finance token has brought it closer to a known inflection zone near $ 40,000, as shown via the Fibonacci retracement chart in the chart below.
In detail, the 0.618 Fib line near $ 40,113 has been limiting YFI's intraday upside attempts. The same level was instrumental in stopping the token's price rally between October and November, which then pushed YFI's price to its 12-month low near $ 17,000.
Nonetheless, if the bulls manage to push YFI price above the 0.618 line decisively, they may also pull the token out of its multi-month range defined by roughly $ 25,500 as support and $ 40,000 as resistance. In that scenario, YFI's next bullish target can move towards the 0.5 Fib line around $ 51,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and business move involves risk, you should do your own research when making a decision.
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