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Yearn.finance (YFI) Posts Massive Short Squeeze; Sparks DeFi Trend Reversal

The DeFi sector is rallying today, with Yearn.finance’s YFI governance token leading this move with a massive rally that first came about yesterday after the crypto nosedived to lows of $7,500.

The support at this level was significant. After tapping this liquidity region, the rally seen catalyzed a cascade of liquidations of YFI short positions that helped push its price up well over 100% in a matter of hours.

This move was more than a simple dead cat bounce of short squeeze, but rather allowed the cryptocurrency to form what appears to be a V-shaped reversal pattern that could mark its recent lows as a long-term bottom.

This had far-reaching implications for the aggregated altcoin market, with nearly all tokens related to the sector seeing some much-needed upwards momentum.

But will this move seen by the embattled sector mark an end to the prolonged downtrend that has been plaguing DeFi over the past few months?

One analyst doesn’t believe that this is the case and stated that he thinks the room for downside is still immense.

Yearn.finance’s YFI Token Leads DeFi Market Rebound 

At the time of writing, Yearn.finance’s YFI token is trading up over 10% at its current price of $13,200.

This is a significant rise from its recent lows of $7,500, as this is the price level that was tapped right before the meteoric rally took place.

Within a mere matter of minutes, this rally sent the crypto surging to highs of $18,000 before it over-extended itself and lost its momentum.

From here, it dipped to $14,000 before rebounding up to $17,000. It has since declined back to its $13,000 support level, and a sustained break below this could lead to significantly further downside.

This created tailwinds for the aggregated DeFi sector, with many tokens seeing explosive momentum.

Will the DeFi Sector Continue Pushing Higher? 

One analyst explained in a recent tweet that he does not believe that this DeFi sector rebound marks a long-term turnaround, despite the massive rally seen by Yearn.finance’s YFI.

Rather, he believes that there’s still a strong possibility that downside is imminent for these embattled tokens.

“Defi Short squeezes are fun. Playing correlations in equally oversold assets is great too. Do I think this means a V reversal for Defi across the board? Absolutely not,” he said while pointing to the below chart.

The coming few days should provide some insight into the latest Yearn.finance movement’s longevity, and into whether or not the DeFi sector will soon begin sliding lower.

Featured image from Unsplash.
YFIUSD pricing data from TradingView.