- LEND price surged another 20 percent on a 24-hour adjusted timeframe.
- The extended upside move brought the DeFi token closer to its all-time high of $0.485.
- Jeff Dorman, the chief investment officer at Arca, credited the LEND economic model behind its 2,000 percent rally this year.
The price of LEND jumped another 20 percent in the last 24 hours, emerging as one of the most profitable assets in this quarter and year.
The LEND/USD exchange rate established its year-to-date high at $0.399 in early Friday trading session. Its gains followed a sharp 45 percent downside correction – that last week found a stable support level near $0.20. That renewed buying interest among traders, pushing the pair by as high as 98 percent in the later sessions.
LEND/USD jumps 100 percent in just two weeks. Source: TradingView.com
Much of the LEND’s profits this year followed a broader crypto market uptrend. After the March crash led by a global market rout, the Federal Reserve’s open-ended stimulus policy, coupled with a lending rate cut to near zero, reduced the liquidity pressure off investors’ shoulders.
As a result, they started buying every asset that could protect them from a falling US dollar and poor bond yields. The sentiment helped the cryptocurrency market, starting with rallies in the proof-of-work tokens Bitcoin and Ethereum.
But a slowdown in their uptrends shifted traders’ interest to the decentralized finance market. Most of the cryptocurrency tokens involved with the DeFi projects–be it staking, lending, or custody–surged higher in the second quarter by triple-digit percentages.
DeFi Hype Continues
A bitcoin price rally towards $12,000 in the third quarter paused the DeFi rally. LEND, as a result, corrected by as much as 45 percent. But as Bitcoin showed signs of consolidation below $12K, the DeFi craze picked momentum all over again.
Jeff Dorman, the chief investment officer at Arca, explained why traders felt overly enthusiastic towards LEND. It begins with the economic model presented by the token’s issuer, Aave.
In retrospect, Aave is a lending/borrowing protocol that enables LEND holders to govern their network. Its features include proposing, voting, and ruling on new additions, features, assets, etc. Additionally, Aave burns LEND tokens based on the fees earned by its protocol.
DeFi’s Breakout Due to Real Value Accretion and Governancehttps://t.co/2YusWr3KZZ
— Arca (@arca) August 3, 2020
Mr. Dorman noted that Aave offers real yield to LEND stakers. Participants can realize their yields by selling other tokens, such as USDC, BAL, or ETH. Therefore, they don’t add any selling pressure on the LEND tokens but get also an option to reinvest their holdings to effectively own the bigger portion of the Aave network.
“In our view, exogenous cash flows are the key to long-term value accretion for token holders because they actually reduce the selling pressure on the native token and help bootstrap positive, reflexive behavior,” added Mr. Dorman.
In simple words, traders generate yields by merely holding LEND. Another DeFi project Compound requires users to sell its native token COMP to realize returns. That is one of the reasons why COMP is falling these days, and LEND is rising.
All-time High Ahead
LEND is now looking to retest its higher levels, with a particular focus on hitting its all-time high at $0.485. Given the fundamentals, the DeFi token could hit the peak, after all. Nevertheless, it may undergo a price correction first to neutralize its overbought sentiments.