Researcher Explains Why Curve (CRV) and Yearn.Finance (YFI) Are Falling

Curve and yearn.finance are among the few decentralized finance projects that have interesting yield farming products to offer. Their volumes have shot upwards due to consistent community involvement. Nevertheless, the price of their governance tokens is reflecting the boom.

Anil Lulla, co-founder/COO of Delphi Digital – a New York-based digital asset research firm, attempted to provide a potential explanation behind the said divergence. In his latest article, titled “Do Vested Rewards Work,” Mr. Lulla dug into the very token distribution models of Curve and yearn.finance.

CRV, YFI, Curve, DeFi
Curve is down about 90 percent from its record high. Source: CRV/USD on TradingView.com
Curve is down about 90 percent from its record high. Source: CRV/USD on TradingView.com

Why Curve Crashed?

By putting his focus mainly on Curve and its governance crypto CRV, the researcher noted that the protocol ensures “insane inflation” by releasing about 2 million CRV every day. Nevertheless, it does not offset the supply with vesting, a phenomenon that allows the project to reward long-term stakers.

Mr. Lulla added that the absence of “vested rewards” creates a downside pressure on CRV, for stakers do not feel the need to lock the token in Curve liquidity pools for a longer timeframe. Instead, they dump CRV in open markets, a sentiment that has already brought its value down by 90 percent.

Curve, CRVUSD, CRV

Curve supply and price comparison. Source: Anil Lulla

The researcher also discussed the massive dumping of HEGIC tokens, after its parent protocol of the same name decided to scrap their plans of vesting. Excerpts from his tweet:

“Almost immediately, the community started complaining and HEGIC started dumping. Just a few hours later, HEGIC announced they’d be returning to a lock-up.”

The Fixing

But a recent flurry of new DeFi projects is attempting to overcome the issue that Curve and yearn.finance carried.

Mr. Lulla named DODO, a liquidity protocol that reserved…

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