DeFi Letter: YFI undergoes strong rally past $35,000, blue chips continue ascent

Heya all. It’s been quite a week for all crypto holders, whether you’re big in bitcoin or big in DeFi.

Let’s take a look at what happened in decentralized finance this past week, what exciting events are coming up, and what whales are doing.

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Since our last DeFi letter, published on Monday, the blue chips in the DeFi market have begun to consolidate. UNI, SNX, and other leading tokens are trading around where they were as of their last report, though are up in the past seven days as a result of ether’s weekend breakout.

One notable exception to this rule is MakerDAO’s MKR token. MKR has been in an extended bear market against ether, having dropped from 2.75 ETH to 0.7 ETH as of last week’s lows. On Tuesday and Wednesday, the cryptocurrency spiked as high as 1.05 ETH. MKR crossed $1,100 for the first time in over two years.

Some analysts use MKR’s price performance against ether as a bellwether for the amount of “normie” interest in DeFi, and may thus see this as a bearish sign.

Another notable outperformer over the past few days is Yearn.finance (YFI). Similar to MKR, YFI’s price action was relatively mild throughout November and December, failing to rally even as bitcoin and ethereum moved past key resistances.

YFI saw a strong breakout from $25,000 to highs around $37,500 this past week.

YFI rallied in the wake of Andre Cronje, founder of Yearn.finance, releasing a number of updates on the protocol on Twitter.

One such update revealed that Yearn.finance is working with the Alpha Finance team. Alpha Finance’s core product is Alpha Homora, a yield farming tool that allows users to obtain leverage on their yield farms.

What We’re Watching This Week

Before we get into what I’m watching in this half of the week, it’s worth noting that SushiSwap, which we called out earlier this week, will actually be releasing its 2021 roadmap soon.

To recap, that roadmap should have more information about BentoBox, the protocol’s Polkadot ambitions, and SushiSwap v2.

SUSHI is expected to benefit from the release of this roadmap, though be wary as this might be a “buy the rumor, sell the news” sort of scenario.

Right now, we’re keeping an eye on Zai Finance.

Zai Finance is the second-most successful fork of Empty Set Dollar (which we explained here for paid subs), behind Dynamic Set Dollar. Zai Finance has thirty-minute epochs, meaning that the supply of the coin expands every thirty minutes if the price of ZAI trades above $1.00.

At its peak yesterday, it had a market capitalization in excess of $80 million.

However, ZAI’s market capitalization has cratered to $50 million after it became clear that ZAI has a bug that allows the supply to expand even when the coin trades under $1. The cryptocurrency continues to plunge as more supply is printed without any checks on the system.

The project might not be dead, though. Assuming they can live through this bug (it will be patched in the coming days), the pseudonymous developers behind the protocol have announced the intent to introduce zkSync, a scaling protocol, to improve the experience users of ZAI have.

Watching Whale Addresses in DeFi

We noticed this but Alex Svanevik, CEO of Nansen, brought it up too. Top addresses, including those that are tagged via the Ethereum Name Service (so-called “ENS domains”), have begun to accumulate via Uniswap a token called WHITE.

WHITE is the native token of Whiteheart Finance, a new DeFi protocol built using Hegic, a decentralized options platform.

Whiteheart is an on-chain hedging protocol, which will automatically purchase an at-the-money on-chain put option whenever a user acquires certain assets on chain. (E.g. Say someone bought one ETH, Whiteheart would automatically buy a put option for that one ETH to hedge downside risk over a set period of time.)

WHITE holders are entitled to a share of the fees generated by the protocol.

Like with other projects built on top of Hegic such as ZLOT, WHITE has a fixed supply, giving it the “scarcity meme” that coins like YFI (and BTC for that matter) share.