Yearn Finance’s (YFI) rally may soon come to an end as bulls attempt to keep the most popular DeFi token alive by holding it above $22,486, a crucial price area that if broken can result in only one thing: a crash.
YFI’s second cycle could end in the same way as its first one, with a head and shoulders pattern indicating a bearish reversal. Will the token bleed slowly just like last time or can we expect a more dramatic price drop?
With their best attempts, optimistic investors are trying to keep prices up in order to not repeat the same fate that YFI had during its first run in September. If prices break down, traders expect YFI to return to its baseline between $4,000 and $8,000 which might prove itself as a better buying position.
Since yesterday, the cryptocurrency keeps falling repeatedly, painting a lower high with each candle. While bulls have tried to close above $22,486 numerous times every single move was rejected. To succeed, they have to close the current daily candle above this level.
YFI may have done so by closing its last daily candle above the 0.382 fib line shown below, but today’s price action indicates that the asset will probably not do so again. The price may have bounced in the meantime but many things can change during the next 9 hours.
At the time of writing YFI trades at $23,330.86, bleeding downwards for the last several hours. RSI fell below 50 on almost all important high timeframes. In fact, the 3D timeframe may close red three candles in a row, which implies an incredibly bearish price action in the near future.
Do YFI bulls still have a chance against the impending crash?
All that is left to do for investors is to sit and watch as YFI tumbles down. Most should wait to see how the token will react once it enters a liquidity zone between $13,000 and $16,000.
The asset may at first bounce, but we still have to see if a far harsher reaction may occur. Whatever happens, bulls should definitely think twice before opening a long position.
The market for YFI may look negative at the moment. Nevertheless, certain bulls find that the moment is ripe for a sharp reversal which may give investors the chance to sell at higher prices. It would definitely not be the first time that an altcoin surprises all investors after having a harsh time.
One user on Crypto Twitter called ‘Young Crypto Wolf’ believes that Yearn Finance consolidates under the current price action and that the momentum is in favor of the bulls.
For this technical analyst, it is highly possible to see minor consolidation before the DeFi token marches upwards again. His charts predict that the cryptocurrency will range until the end of the month after which it will sharply ascend back to $30,000. In this case, prices would move far different compared to the first rally which ended with YFI bleeding for an entire month.
Naturally, YFI still has a chance to become bullish given that Bitcoin has not lost any of its momentum in December. As of today, the leading cryptocurrency made a new ATH at $28,500.
If the asset ‘relaxes’ for one moment and consolidates under the new high it would be possible to at least see certain altcoins recover. In this scenario, DeFi’s most popular blue chips such as YFI, Chainlink, and AAVE would definitely have a chance to rise again.