Yearn Finance token’s price plunges- what’s the reason behind the nosedive?

Yearn Finance, famously known by its abbreviation **YFI**, experienced a drastic 45% plummet, dipping below $9,000 on November 18th. This sharp decline was attributed to market manipulation accusations, specifically by the dYdX team. The price of YFI stood at approximately $9,260 on a Sunday morning, marking a significant drop from the previous day.

The reason behind the nosedive in YFI price

The substantial decline in Yearn Finance’s value was a consequence of negative market sentiment triggered by allegations of potential market manipulation. The event was accompanied by substantial deposits into exchanges, leading to on-chain data revealing a prominent seller, resulting in a sharp price decline. Moreover, the dYdX team pointed out possible market manipulation, as they utilized $9 million from their v3 insurance fund to address liquidation gaps in the **YFI** market.

The misinformation and apprehensions revolving around YFI’s price on November 18th led to a surge in liquidations, with Coinglass data indicating a total of $4.55 million liquidated within 24 hours, predominantly from long positions accounting for over $3.07 million.

Understanding Yearn Finance

Yearn Finance’s governance token, **YFI**, is intricately linked to the decentralized finance (DeFi) ecosystem, offering a pioneering yield farming protocol. Renowned DeFi players such as Aave, dYdX, and Compound have integrated the platform’s diverse products, encompassing lending aggregation, yield generation, and insurance. The recent spike in the token’s value can be attributed to the integration with prominent DeFi players, resulting in significant market traction. However, profit-taking activities could have contributed to the token’s price surge, culminating in the subsequent decline.

As of now, YFI has observed modest weekly gains of just over 2%, with a 30-day performance showing an 85% increase.

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