Yearn.finance (YFI) set off the current wave of defi with a unique attribute of automated yield farming. YFI was the first coin to achieve mainstream attention for being worth more per coin than bitcoin (there were others, but they didn't have the impact of YFI). It also catapulted the developer, Andre Cronje, into rarefied air.
Unfortunately, Cronje's next project was not as successful. Famous for his Twitter subtitle, "I test in prod," Cronje put out the beta version of Eminence before it had been thoroughly tested. The project was hacked, and investors lost millions of dollars in value. The backlash was serious enough to cause Cronje to consider quitting social media. and crypto dev work, if only for a few days.
It didn't take long for Cronje to come back with his next project, Keep3r. The Keep3r project is a way for developers to hire others to finish tasks such as liquidations or harvests. Upon successful completion of these tasks, the worker is rewarded with the Keep3r token. Upon its announcement and listing on Dextools, the value of Keep3r shot up from below US $1 to US $300 in less than 72 hours. It topped out at US $381.
At the same time, YFI was falling out of its sideways pattern into bearish territory. Many thought that YFI investors were redistributing their funds from YFI into Keep3r. Although the two projects are connected through Cronje, there may be some other reasons that Keep3r and YFI took divergent paths. Let's take a look at what is happening in defi as a whole:
Yield Farming Fails
The overall traffic on the Ethereum network is down from its local high in August. The altcoin surge in that month was driven by new technologies like YFI, and the influx of new adoption gave developers room to consider higher APYs in their farms. 4-digit APYs were common, with some farms even holding 5-digit APYs for days before dropping algorithmically.
In September, October and November, altcoins went through a slump. Hurt by the initial failure of huge projects such as Sushiswap, under the table crypto influencer deals and unscrupulous developers who rugpulled on investors, yield farming hit a downturn even with YFI in full operation. The YFI protocol worked fine; it's just that the market as a whole lost adoption. With that loss came lower APYs for farms and less interest in yield farming as a whole.
The Bitcoin Breakout
Bitcoin recently hit local highs of near US $16k in November, but the fervor for the next bitcoin breakout came weeks before that. Alongside the drop in APY came news of mainstream financial institutions investing heavily in bitcoin. Interestingly, the price of bitcoin did not move much even on announcements of MicroStrategy and Square investing almost US $500 million in bitcoin between them. Other companies followed suit, and Iran's central bank also announced a substantial investment in bitcoin.
This news caused retail investors to redirect much of their funds from defi into bitcoin holdings, and those holdings came off of the exchanges into custodial wallets. As such, the total amount of money in defi dropped by a few billion, reducing the participation in projects such as YFI.
Keep3r vs. YFI
The purpose of Keep3r is completely separate from YFI, so there really is no direct link between the two other than the name of their developer, Andre Cronje. When money came out of defi as a whole, YFI suffered as the linchpin for much of the previous wave's volume. Keep3r was the beneficiary of good timing more than a redirection of funds. Investors were eager to get into a project that looked like a quick profit.
With the rest of defi in the red, any money that wasn't in bitcoin looked like it flowed directly into Keep3r. This has less to do with a direct flow from YFI than with an overall flow into a new project.
With both projects having strong use cases, many analysts believe that both YFI and Keep3r will perform well as altcoins recover from their 3-month bear cycle. A rise in Ethereum mainnet fees is just one of the signs that life is returning to the sector. Stability in the US markets after the conclusion of the presidential election and hope for a stimulus will likely be catalysts in the near future.
