Two months ago, Yearn was one relatively unknown decentralized lending aggregator among many emerging projects in the DeFi sector. From less than $10 million in total value locked into the protocol, it has exploded by over 7,500% to today’s TVL levels of $763 million.
What’s more, its native governance token YFI has seen similar gains in prices that have now surpassed those for Bitcoin itself.
Big Returns for YFI Holders
Recent research by Messari crypto has delved into the surge in popularity of the platform and the yields it could potentially return to token holders and liquidity farmers.
Over the past several days, YFI has produced cash for token holders at an annualized rate of $21 million
At its current market capitalization of $390 million it implies ~20x price-to-sales ratio, among the lowest in DeFi.
— Messari (@MessariCrypto) August 24, 2020
Researcher Ryan Watkins explained that the attraction appears to be the automation of yield farming with the launch of Yearn Finance v2. In a move to reduce time on research and gas costs, the protocol allowed yield farmers to simply deposit their funds into a ‘yVault’, and have their crypto collateral automatically allocated across the most optimal strategies and pools available.
YFI’s tokenomics consist of a two-fold mechanism of Earn, or lending optimization, and Vaults, or yield farming optimization, he added.
Looking at price-to-sales multiples, the researcher noted that YFI was one of the lowest in the DeFi industry at 20x. A price-to-sales ratio is a valuation ratio that compares a company’s stock price, or crypto asset price in this case, to its revenues. Using these numbers, he added;
“YFI currently produces cash at a rate of just over $21 million annualized.”
A chart depicting the inverse of the price to earnings ratio, also known as P/E ratio, showed that a 5% annual return would be earned if all YFI holders were to stake their tokens. With around 12% of YFI currently staked in the pool, stakers are receiving roughly 40% annual yield using a P/E ratio of 2.4.
This big question, however, regarded the sustainability of such a system.
YFI Price Update
With a limited supply of just 30,000, YFI token prices have skyrocketed in recent days, even eclipsing Bitcoin itself. Clearly, a small number of whales have made immense profits from this latest DeFi darling.
The current price of YFI is around $14,200 , which is an increase of 240% over the past ten days. Industry pundits are already calling it the new gold of crypto, and it certainly is behaving that way at the moment.