Top crypto investment firm Polychain Capital just bought $4.78 million worth of the decentralized finance (DeFi) platform YFI, according to blockchain analyst Alex Svanevik.
The governance token of DeFi protocol yearn.finance, YFI launched in July and promptly exploded to a high of $43,873 by mid September. However, it has since seen a relatively steady decline in value, trading at $14,530 at time of writing, according to CoinMarketCap.
Svanevik, the chief executive at Nansen, an Ethereum-wallet-focused blockchain data firm, first pointed out Polychain’s reported investment of 329 YFI. Nansen’s analysis indicates Polychain made the YFI acquisition on October 16th.
$YFI ? pic.twitter.com/YMvESkEbXr
— Alex Svanevik ? (@ASvanevik) October 17, 2020
Polychain Capital is led by Olaf Carlson-Wee, the former product manager and head of risk at Coinbase. The five-year-old hedge fund reportedly managed nearly $1 billion in assets by mid-2018, but by the end of that year had $591.5 million in assets under management, according to the Wall Street Journal.
The head of research at Spartan Capital, Jason Choi, is warning traders about blindly following Polychain’s move and investing in YFI.
“While I’m long term bullish and see this as validation, blindly copy trading funds is a bad idea. Investment alone does not indicate conviction; size relative to AUM (assets under management) does. 0.05% vs 5% tell very different stories.”
In the short term we still need to break this cycle:
— Jason Choi (@mrjasonchoi) October 18, 2020
Collapsing APY -> TVL drain -> less fees -> less value capture by $YFI
This will likely continue unless yields return and/or yearn strategies diversify beyond reliance on yCRV vault/ yield farming alone. pic.twitter.com/1pgCADJpnr
Andre Cronje, the now-famous creator of the yearn.finance protocol, actually intended for YFI to be a completely “valueless” governance token.
In a blog post in mid-July, Cronje said he released the token in order to give up management of the control mechanisms, configurable fees, maintenance controls, and rules of yearn.finance’s various systems.
“In further efforts to give up this control (mostly because we are lazy and don’t want to do it), we have released YFI, a completely valueless 0 supply token. We re-iterate, it has 0 financial value. There is no pre-mine, there is no sale, no you cannot buy it, no, it won’t be on uniswap, no, there won’t be an auction. We don’t have any of it.
Earning YFI is simple, provide liquidity to one of the platforms above, stake the output tokens in the distribution contracts (we will provide an interface for this), and you will earn a (governance controlled) amount per day…
And just because we feel we didn’t stress it enough, 0 value. Don’t buy it. Earn it.”
