Yearn.finance (YFI) is set for a price correction after reaching $42,000 for five consecutive days. Notably, lack of adequate buying volume and overbought risk is behind the bearish outlook.
YFI prices up so far
The price of YFI rose slightly more than 47% to $41,970 in five days as traders moved capital from “top-cap” cryptocurrencies like bitcoin (BTC) and ether (ETH) and looked for short-term opportunities in the altcoin market.
#dfi The properties are showing some good signs of development for early 2022. $YFI, $UNI, And $ come All is going well so far with the first Monday of the year #bullish for many #altcoins, https://t.co/8uzolCvt5z pic.twitter.com/ASpf1dUbtn
— sentiment (@santimentfeed) 3 January 2022
Given that its value has risen by 47% and 41.50% respectively against BTC and ETH in just five days, Yearn.finance was one of the beneficiaries of the so-called capital migration. Meanwhile, a token buyback program was at the core of traders’ sudden purchases on the WiFI markets.
On December 16th, the Yearn.finance team announced that it has Purchased YFI tokens worth over $7.5 million At an average price of $26,651 per unit from the open market. It also disclosed $45 million in additional cash in its coffers that it will use to continue its YFI buyback spree.
Additionally, the Yearn.finance community also proposed that a portion of the YFI Treasury token buyback be directed to reward YFI holders who actively participate 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 buying back YFI in a big way.
-They are re-thinking their Tokenomics to distribute fees to holders, currently looking at the VCRV model and the XSushi model.
Ratios are crazy. https://t.co/CzuHhbNuhx
— adam cochran (@adamscochran) December 16, 2021
YFI price rose by over 100% against the United States Dollar following the announcement of the token buyback.
YFI price correction risk
However, YFI’s trading volume fell despite the rally, suggesting less confidence in its upside among traders.
Typically, a bearish divergence between price and volume leads to either a correction or a consolidation until the conviction increases. As a result, YFI is more likely to at least halt the ongoing price rally, with its daily relative strength index also entering its overbought territory above 70, a sell signal.
RELATED: YFI Price Up 46% in Just Four Days Yearn.finance’s $7.5M Buyback
Additionally, 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 graph in the chart below.
Explanation, the 0.618 Fibonacci line near $40,113 is limiting intraday attempts on the upside for YFI. The same level played a key role in halting the coin’s price rally between October and November, which subsequently led to the price of YFI hitting a 12-month low near $17,000.
Nevertheless, if the bulls manage to push YFI price decisively above the 0.618 line, they could take the coin from its multi-month range defined by around $25,500 as support and $40,000 as resistance. Huh. In that scenario, the next upside target for YFI is likely to move towards the 0.5 Fibonacci line near the $51,000 level.
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 trading move involves risk, so you should do your own research when making a decision.
