LSDs/LSTs are the strongest narrative now
But everyone’s overlooking one OG DeFi protocol in this race
Here’s a breakdown of what it is and how you can profit:
(Including specific trading strategies)
What Will Be Covered?
1. Background
2. LSD Catalyst
3. veYFI Catalyst
4. Shanghai Upgrade/LSD Narrative
5. How To Take Action
Background
@iearnfinance is a familiar face to most DeFi users.
It is a yield aggregator that maximises yield for its users by combining various strategies.
Its main edge over other aggregators is its stronghold on $CRV which has enabled it to take advantage of $CRV emissions.
Catalyst #1: Liquid Staking Derivatives (LSDs)
Yearn has announced that they will soon be launching yETH.
By allowing users to diversify their LSDs, yETH will reduce risks like depegs.
However, the main thing to note here are the boosted yields 🚀
twitter.com/iearnfinance/status/1628104719003418632?s=20
Catalyst #1: LSDs
Yearn holds an insane amount of $veCRV, which will allow their users to get the best Curve yields.
LSDs have seeded liquidity on Curve, meaning that Yearn could allow LSD liquidity depositors to boost their yield with their $veCRV.
twitter.com/iearnfinance/status/1627724253075210270?s=20
Catalyst #1: LSDs
So how does this tie into yETH?
Well, it seems likely that Yearn will be using their veCRV and their compounding strategies for the LSDs.
Below, we can see how the yields of the $frxETH Curve LP and $sfrxETH validator yields could be compounded.
twitter.com/MStiive/status/1628273411087822849?s=20
Catalyst #1: LSDs
Yields will be auto-compounded and $CRV emissions will be maximised.
Yearn will likely carry this out for all other LSDs included in yETH.
Hence, it is likely for yETH to have the best LSD yield in the game.
Catalyst #1: LSDs
As we have seen, the magnitude of yield is clearly an important factor for LSD users.
The TVL for $frxETH has been consistently on the rise, as it offers more yield compared to blue-chip players like Lido.
Catalyst #1: LSDs
With its attractive yields, I expect to see strong TVL growth for yETH immediately.
Yearn is also likely to take a fee for providing yETH. Normally, fees are directed to the treasury which is then used for buybacks.
This is real buying pressure on $YFI.
Catalyst #1: LSDs
The value accrual for $YFI could be off the charts if yETH was to be launched successfully.
Being a blue-chip protocol and likely offering the best LSD yield soon, the success of yETH is more than probable.
Catalyst #2: veYFI
$veYFI is currently undergoing an audit for stakers to be able to receive a share of fees.
There is also potential for bribes since veYFI may be able to be used for voting on vaults.
Catalyst #2: veYFI
With more fees flowing in from yETH, there will be more value accrued to $YFI whether from buybacks or fee revenue.
A classic flywheel effect. Love it.
$ETH Shanghai Upgrade
The much awaited Shanghai upgrade is approaching us in a month.
ETH stakers will finally be able to unlock their staked ETH. I think this is bullish for LSDs.
As unlocks are enabled, it will be confirmed that the LSDs can be redeemed for ETH 1:1.
LSD Narrative
People will be more confident to stake their ETH knowing that they can get it back.
As LSDs allow for flexibility and more yields, people will be looking out for the best LSD $yETH 👀
Check out my buddy's @arndxt_xo thread on Shanghai:
twitter.com/arndxt_xo/status/1630068499333906432?s=20
Market Cap
Just a quick thing to take note, $YFI's market cap is about $310M.
This is still quite far off from protocols like $FXS and $RPL at $780M and $920M.
There could be much upside to be discovered 🤯
Actions Moving Forward
To take advantage of the narrative and the release of yETH, let us analyse a few actions we can take.
Using TA, we can see that price of $YFI has convincingly broken above the previous resistance of $8.6K.
It even retested it and bounced off it.
Actions Moving Forward #2
The current $9.4K level could act as a support since price has tested this region multiple times previously.
The psychological level of $10K has caused two rejections in the past few days.
If $YFI holds between $9.4-10K by today, an entry may be wise
How To Take Profit
Previously, $YFI suffered some insane rejection from the $14.2K level, indicating strong resistance.
One could enter at around $9.4K and exit at $14.2K, copping a 50% gain, not too shabby 🥴
How To Take Profit #2
We could hold up to the day of Shanghai, where we are likely to experience a selloff due to the typical "sell the news".
We saw this happen during the Merge, where $ETH closed 10% lower.
Selling just before Shanghai could be wise.
How To Take Profit #3
If we followed the second strategy, we could then get back in after the selloff.
We could proceed to use TVL stats to gauge when is a good time to sell.
To me, I would take profit after I notice a stagnation in the growth of $yETH.
How To Take Profit #4
We can track the TVL of LSDs on @DefiLlama.
We preferably want to continue seeing numbers similar to what $frxETH is experiencing.
defillama.com/lsd
How To Take Profit #5
Market share could also be a good gauge in which we could aim for something like 5%.
However, do note that TVL of LSDS may experience an influx after Shanghai is successful.
That would mean that the market size has increased.
Conclusion
$YFI seems set to roar as the release of yETH and veYFI approaches.
With the Shanghai upgrade nearby, I see a strong bull case for blue coin 🧐
I hope that I have helped you all out with my thinking process.
My goal is to provide quality information for free.
I've never paid for any crypto course, and I don't think you need to.
What else do you want to see? Feel free to comment down below!
Check out my daily portfolio updates where I document all my trades!
twitter.com/matrixthesun/status/1629865875343044615?s=20
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