After YFI prices rose by 100% in less than 3 weeks, Yearn.finance is facing a callback risk

Yearning for financeYFI) After rising to close to $42,000 for five consecutive days, it seems to be preparing for a price correction. It is worth noting that the lack of sufficient purchase volume and the risk of overbought are behind the bearish outlook.

YFI price rebound so far

YFI price As traders moved funds out of “top” cryptocurrencies such as Bitcoin, it soared by more than 47% to $41,970 in five days.Bitcoin) And ether (Ethereum) And look for short-term opportunities in the altcoin market.

#DeFi Assets are showing some good signs of growth, starting in 2022. $YFI, $UNI, and AAVE So far, the first Monday of this year looks good #Bullish For a few people #Altcoin. https://t.co/8ujolCvt5z pic.twitter.com/ASpf1dUbtn

-Santiment (@santimentfeed) January 3, 2022

Yearn.finance is one of the so-called beneficiaries Capital migration, Given that its value to BTC and ETH has risen by nearly 47% and 41.50% respectively in just five days.At the same time, at the core of the sudden emergence of traders Buying interest in YFI market It is a token repurchase program.

On December 16, the Yearn.finance team announced that it had Purchased YFI tokens worth more than USD 7.5 million The average price from the open market is $26,651 per unit. It also revealed that the additional cash of USD 45 million in its treasury will be used to continue its YFI repurchase boom.

In addition, the Yearn.finance community also proposed that the YFI Ministry of Finance directly use part of the token repurchase to reward YFI holders who actively participate in Yearn Governance.Proposal (full details here) Is currently in the voting stage.

1/8

Because the cat here is not in the bag:

-Yearn has begun to repurchase YFI in large quantities.

-They are re-examining their token economics to allocate fees to holders, and are currently working on the veCRV model and the xSushi model.

-The ratio is crazy. https://t.co/CzuHhbNuhx

— Adam Cochran (@adamscochran) December 16, 2021

After the token repurchase announcement, the price of YFI surged more than 100% against the U.S. dollar.

YFI’s price correction risk

However, despite the rise, YFI’s trading volume has declined, indicating that traders have low confidence in its upward movement.

Usually, a Bearish divergence A correction or consolidation will occur between price and volume until the belief increases. Therefore, the possibility of YFI at least suspending its continued price increase is very high, and its daily relative strength index has also entered the overbought area above 70, which is a sell signal.

related: In just four days after Yearn.finance’s $7.5 million repurchase, YFI prices rose by 46%

In addition, the latest price increase of Yearn.finance token brings it closer to the known inflection point near $40,000, as shown in the Fibonacci retracement chart below.

In detail, the 0.618 Fib line near US$40,113 has been restricting YFI’s intraday upward attempts. The same level helped prevent the price of the token from rising between October and November, which later caused the price of YFI to fall to a 12-month low, close to $17,000.

Nevertheless, if the bulls manage to decisively push the price of YFI above the 0.618 line, they may also define the token as outside the multi-month range of support at approximately $25,500 and resistance at $40,000. In this case, YFI’s next upside target may move towards the 0.5 Fib line near $51,000.

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.