Fantom & YFI – Can yield farming sustain their respective rallies

By giving HODLers a wide range of options to earn high returns, yield farming has taken Decentralized Finance by storm. DeFi hasn’t only instigated noteworthy rallies in the prices of reward tokens. Instead, it has also managed to facilitate the influx of a whole new set of people into the crypto-ecosystem.

While some major DeFi tokens have seen major price corrections recently, the overall health of this sector has been in good shape. The total value locked in DeFi, for instance, spiked from $71.7 billion to $88.5 billion in just a day’s time.

Having said that, it should also be noted that altcoins like Fantom and YFI have had an impressive run since the beginning of October.

The X-factor

Apart from the broader market trend assisting the price of these two tokens, yield farming has been another major contributing factor.

Consider this – Flows from Ethereum to Fantom kept oscillating in the $10-25 million range per day for the most part of September. However, this number has exponentially risen and has been revolving around $450 million of late.

The launch of Geist Finance, a new yield farm, instigated capital inflows. On the back of the ridiculous incentives announced, early farmers ended up 10x-ing their capital in just a day’s time by providing liquidity.

Inflows to Fantom || Source: Delphi Digital

So, will the hype be able to sustain itself for long?

As far as Fantom is concerned, it’s unlikely.

Whales primarily HODL more than half the circulating supply [56.35%] of Fantom, and by virtue, such large participants only get into yield farming. They have, however, been gradually backing out. The same was well evidenced on the number of large transactions chart.

The reading of this metric has nearly halved in comparison to the readings on 8 October 2021.

However, the state of the same metric for YFI seemed to be in better shape,

Large txns – Yearn Finance || Source: IntoTheBlock

Further, if participants are indeed yield farming, they’ll have to lock up their HOLDings for a substantial period of time to fetch returns/rewards.

However, ITB’s data highlighted that the number of short-term Fantom HODLers [who cling to the token for <1 month] has increased by more than 5.5 times when compared to July of this year.

Thus, it becomes quite evident that the new participants have entered the market just to mint some quick bucks and exit.

Trader count – Fantom || Source: IntoTheBlock

Over the same time period, however, the number of YFI traders has decreased, indicating the long-term interest of the majority of participants. Further, YFI’s TVL curve has been on the rise, while that of Fantom has already begun its downward journey.

Thus, as far as Fantom is concerned, the yield farming hype wouldn’t be able to sustain for long when compared to YFI. In effect, FTM isn’t in a great position to prolong its rally, while YFI’s prospects look relatively better.