YFI Crypto token sets six-month highs as Yearn Finance teases Ether Liquid Staking product

Yearn Finance’s native YFI token surged as much as 39% in the week to Friday, trading volume rising nearly fivefold as developers said they will soon introduce a product that allows users to gain exposure to a basket of floating rate derivatives through one token .

YFI rose 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 developers said on Tuesday that an upcoming 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. Increase returns,” Yearn tweeted. Yearn did not immediately respond to requests for further comment.

Some analysts say such tokens could help active crypto investors diversify risk, which could drive demand for YFI.

“yETH essentially spreads the risk across the various Ethereum LSDs while earning additional returns 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 returns compared to other LSDs and puts Yearn in a prime position to capture a large portion of the LSD market that will accrue additional fees to veYFI players.”

Curve is a stable coin exchange service, while veYFI and veCRV refer to derivative tokens issued to stakers who lock YFI and Curve’s CRV tokens for a period of time to increase liquidity on the platform in exchange for yield rewards.

Yearn is a set of protocols that work together 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 return strategies.

Liquid staking refers to the exchange of staked ether for tokenized versions of ether that can be used in decentralized finance (DeFi) applications. The areas of use vary from collateral for loans or margin trading to earning returns.

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 Deposited ether cannot currently be withdrawn or traded freely.

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

Tokens for all these products can be used in protocol management or increasing returns based on the number of tokens held by an investor – providing value for such tokens.