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What is the crypto Goldfinch??

DeFi

en.cryptonomist.ch 14 February 2023 19:20, UTC
  
Reading time: ~4 m

Goldfinch (GFI) is a crypto token on the Ethereum blockchain.

It was launched only last year, and its performance in the market has been very disappointing from the start.

Specifically, GFI is the governance token for Goldfinch, which is a DeFi project that aims to make decentralized loans more accessible through collateral that can reside both on-chain and off-chain.

Summary

Goldfinch (GFI) crypto

The Goldfinch project claims to make it possible to earn interest by lending cryptocurrencies to real businesses.

Right now it claims more than $101 million in loans already disbursed, currently yielding 7.8% APY on USDC.

It also claims to have disbursed more than $100,000 in interest in the last month alone.

This interest, according to the project’s official website, comes from loans disbursed in the real world, and the investments are collateralized off-chain. In this way, Goldfinch’s loans are very different from classic, highly volatile DeFi loans.

Website also states that the project is backed by Coinbase Venture, Andreessen Horowitz, and other big names in venture capital.

The idea is to allow those who hold stablecoins to lend them to real businesses in exchange for an annual return that actually seems higher than that of classic fiat currency loans.

Question remains how they can guarantee such high returns, i.e., higher than those of the fiat dollar loan market, although these are by no means implausible returns.

The GFI governance token

The fact that it debuted in the crypto markets at the height of the bear market certainly did not do much for GFI’s price.

It is enough to mention that it hit an all-time high on the very day of its launch, i.e., 11 January 2022, at $34. Since then it has already lost more than 98% of its market value, in just over thirteen months.

It must be said that the heart of the Goldfinch project is not its GFI governance token, but its USDC loans, and these for now seem to continue to perform well.

The price of GFI on the crypto market immediately started to fall, and since then it has practically not stopped until the all-time low touched a few weeks ago, on 7 January 2023, at $0.44.

It has practically strung together four consecutive collapses.

Consecutive collapses

The first began the same day as the listing, and ended in late February 2022 at $2. Practically in little more than a month and a half since its debut it has lost more than 50% of its value.

The second began in early April and ended during the implosion of the Terra/Luna ecosystem in May, with GFI’s price dropping to $1. In other words, another -50% in just under two months.

The third began in mid-June, and ended in mid-September at about $0.7. Of the four collapses it was the slowest and most contained.

The fourth began around mid-October and ended in early January just above $0.4.

Since the January low, the price for now has climbed back up to $0.6. Which is not far from the level with which the third, slower and more contained collapse ended. In other words, it seems to have had the strength to undo all the losses accumulated during the fourth and last collapse, not least because at the beginning of February it had actually managed to get right back up to $0.7.

While these figures are not good at all, it is worth mentioning that the collapse of 2022 could also be due simply to the trend in the crypto markets, especially with respect to the smaller altcoins.

Taking tokens that are in some ways similar as a reference, for example Aave, which is one of the absolute most important in the DeFi lending sector, right now is still at -87% from the highs, while Compound is at -94%. By contrast, Solend is at -98%, roughly in line with GFI, so the very negative price performance of Goldfinch’s governance token is not at all abnormal.

The returns of the Goldfinch crypto project

While the market value of Goldfinch’s governance token is in a very strong slump. USDC loan yields on Goldfinch remain attractive, albeit lower than those of other DeFi lending protocols.

The point is that DeFi loans that completely run out on-chain tend to have high but volatile returns at times. This may scare some people off, whereas Goldfinch aims to deliver returns that are perhaps lower, but less volatile. Because they do not fully deplete on-chain, but rest on the real physical world.

The doubt is that there are firms willing to pay more for a USDC loan than they pay for USD ones, unless they use those USDC either for purposes that are not strictly lawful, or to themselves speculate in the crypto markets.

This is why there are several opinions circulating that are not at all generous toward this project.


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