YFI Sets Six-Month High as Yearn Finance Teases Ether Liquid Staking Product

Yearn Finance’s native YFI token surged as much as 39% in the week through Friday and trading volume soared almost five-fold as developers said they will soon introduce a product that allows users to gain exposure to a basket of liquid staking derivatives through one token.

YFI surged from $7,200 earlier in the week to more than $10,000 in Asian morning hours on Friday, climbing to levels not seen since September, 2022.

Yearn's YFI tokens set six-month highs. (CoinMarketCap)

Yearn developers said on Tuesday that a forthcoming token will give users exposure to a basket of ether liquid staking derivatives (LSD) as the sector gains favor among investors.

“Introducing yETH, an LSD of LSDs. Get exposure to a basket of LSDs in one token. Spread your risk. Boosted yields,” Yearn tweeted. Yearn did not immediately respond to requests for additional comment.

Some analysts say that such tokens can help active crypto investors diversify risk, which may be driving demand for YFI.

"yETH essentially spreads the risk across the various Ethereum LSDs while also earning additional yields through Yearn’s large veCRV position for Curve Pools," pseudonymous crypto investor DeFi Maestro told CoinDesk in a Twitter message. "This means that yETH will always have higher yields compared to other LSDs and puts Yearn in a prime spot to capture a large portion of the LSD market that will accrue additional fees to veYFI stakers."

Curve is a stablecoin swapping service, while veYFI and veCRV refer to derivative tokens issued to stakers who lock up YFI and Curve's CRV tokens for a period of time to increase platform liquidity in exchange for yield rewards.

Understanding Yearn and Liquid Staking

Yearn is a set of protocols working in conjunction with the Ethereum blockchain that allows users to maximize their passive earnings on their crypto assets through lending and trading services. YFI is Yearn’s governance token. It allows holders to vote on protocol upgrades or the introduction of new products and yield strategies.

Liquid staking refers to the exchange of staked ether for tokenized versions of ether that can be used in decentralized finance (DeFi) applications. Uses range from collateral for loans or margin trading to earning yield.

The LSD sector has performed handsomely in the past two months ahead of Ethereum’s Shanghai upgrade, which will allow investors to withdraw their ether staked on the Ethereum blockchain. Staked ether cannot currently be withdrawn or freely traded.

Tokens in the sector, such as Lido’s LDO, Stader’s SD and Rocket Pool’s RPL, have seen prices more than quadruple in the past few months as they gained favor among investors.

Tokens of all these products can be used in protocol governance or increasing yield based on the number of tokens held by an investor – which drives value for such tokens.