Yearn.finance (YFI) looks at $ 42,000 after five consecutive days of earnings before a correction. However, behind the declining outlook hides the lack of purchase volume combined with the risk of overbought.
Previous YFI rally
The YFI price rose more than 47% to $ 41,970 in five days as traders turned away from “high-cap” cryptocurrencies like Bitcoin (BTC) and Ether (ETH) and looked for short-term opportunities in the altcoin market .
📊 #DeFi Assets are showing some nice growth signals to kick off 2022. $ YFI, $ UNI, and $ AAVE So far, everyone has ticked well with the first Monday of the year in search of things #bullish for many #altcoins. https://t.co/8ujolCvt5z pic.twitter.com/ASpf1dUbtn
– Santiment (@santimentfeed) January 3, 2022
“DeFi’s assets are showing some good growth signals as we move into 2022. YFI, UNI and AAVE are all doing well so far. “
Yearn.finance is one of the projects that has benefited from capital migration as its value has increased by almost 47% and 41.50%, respectively, compared to BTC and ETH in just five days. Meanwhile, the core element of dealers’ interest in the YFI market is the buyback program.
YFI / ETH and YFI / BTC price chart daily frame after announcement of buyback | Source: TradingView
On December 16, Team Yearn.finance notification bought YFI for over $ 7.5 million in the open market at an average price of $ 26,651. They also revealed an additional $ 45 million in cash in their coffers that will be used for further buybacks.
Additionally, the Yearn.finance community suggested that the YFI Treasury use a portion of the buyback to reward owners who actively participate in the Yearn governance, which is currently in the voting phase.
YFI price rose more than 100% against the US dollar following the announcement of the buyback.
Price adjustment risk from YFI
However, YFI’s trading volume has declined despite the rebound, showing that traders don’t really trust its upward move.
YFI / USD price chart with daily frame and price-volume divergence | Source: TradingView
Typically, a bearish divergence between value and volume leads to a correction or consolidation until confidence rises. As a result, there is a good chance that YFI will have to interrupt its ongoing rally as its Daily Relative Strength Index (RSI) also enters the overbought territory above 70, a sell signal.
Additionally, the recent rally has brought YFI close to the turning zone of $ 40,000, as shown by the Fibonacci retracement in the chart below.
Three day YFI / USD price chart with Fib entry and exit levels | Source: TradingView
In particular, the 0.618 Fib line near the $ 40,113 level capped YFI’s bullish intraday attempt. Those levels also halted the October-November rally, which subsequently pushed the YFI price to a 12-month low near $ 17,000.
However, if the bulls attempt to push YFI price significantly above the 0.618 Fib line, they can also take it out of a multi-month area limited by support at $ 25,500 and resistance at $ 40,000. In this scenario, the next upside target for YFI could be towards the 0.5 fib line around the $ 51,000 mark.
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