Cream Finance crypto jumps 65%: is this the new popular choice?

  • CREAM’s trading volume increased by 378.65% in 24 hours, pushing its price close to $75.
  • Almost all crypto holders are whales, but Cream Finance’s TVL was disappointing.

CREAM, the native token of Cream Finance, a DeFi protocol, unknowingly surprised the crypto market when its price rose 65.25% in the past seven days. This increase came at a time when the prices of most cryptocurrencies were declining or consolidating.

At the time of writing, CREAM was priced at $72.25 with a market cap of $133.40 million. However, Cream Finance’s reach in the market seems limited given that the crypto is not part of the top 100.

For those unfamiliar, AMBCrypto explains what the project entails in this article.

What is Cream Finance?

Cream Finance is part of [YFI] ecosystem. However, Cream does not only work as a lending protocol for private individuals. Instead, it also gives institutions and other protocols access to liquidity on its network.

Cream Finance is a permissionless and open-source network and works for users of the Binance Smart Chain, Ethereum, Polygon and Fantom blockchains.

Not many people know this, but CREAM came to life after a hard split from Compound Finance [COMP] in 2020. In crypto, a hard fork is a change in the protocol of the blockchain network.

When this happens, previous blocks become invalid, as do transactions. Additionally, users and nodes upgrade to the latest version to remain compatible with the upgrade.

Sometimes a hard fork comes with a new token. Sometimes that is not the case. For Cream Finance, the split in 2020 led to the development of the CREAM cryptocurrency.

CREAM allows users to stake, lend and borrow assets on the network. However, the token is not the only asset that can be used on the network. Cryptos like COMP, ETH, YFI, some stablecoins and a few other tokens can interact with Cream Finance.

“This group” drives the price higher

According to the recent price increase, AMBCrypto noted that Cream Finance did not announce any major developments. However, using IntoTheBlock data, we found that there was an increase in whale activity.

Whales own a larger amount of cryptocurrency. Typically, the tokens held by this cohort represent 1% of the total circulating supply.

According to data at press time, approximately 94.74% of CREAM holders are whales. Of this group, 19.42% have completed 1,362 transactions in the past 24 hours.

Data shows CREAM holders by concentration

Source: IntoTheBlock

This number is considered high whale activity and is enough to significantly impact prices. So it seemed that high whale activity was the reason Cream Finance outperformed other projects.

Confirmation of this increase appeared in trading volume. At the time of writing, CREAM’s volume has increased by 378.65% in the last 24 hours.

On May 19, volume exceeded $100 million, according to Santiment data. With this volume, CREAM’s price closed at $75.

Moments later, the price dropped, indicating that some holders of the token were making profits. While volume had dropped slightly from this point, it may not have been enough to force a double-digit correction.

Cream Finance shows an increase in volume and crypto price

Source: Santiment

If volume continues to rise while the price rises, CREAM could rise another 15%, taking the price to $83.95.

However, a drop in volume could mean declining strength of the token. In this case, the price could fall to $53.59, which was another area of ​​interest.

Is CREAM reliable?

Despite the stunning price increase, Total Value Locked (TVL) indicated a bearish signal. TVL is an indicator of the health of a protocol.

If the benchmark rises, it means market participants are depositing assets into the ecosystem. When the TVL decreases, this indicates an increase in the number of admissions.

In this case, it could mean that participants no longer trust the system to deliver good returns. According to AMBCrypto’s analysis using DeFiLlama, Cream Finance’s TVL was over $2 billion in 2021.

Cream Finance TVL drops

Source: DeFiLlama

But after a Flash Loan onslaught in 2021, the benchmark has become a shadow of its former self. For context, a Flash Loan attack occurs when a flaw in a protocol is taken advantage of and uncollateralized loans are withdrawn from a lending protocol.

Realistic or not, here is the market cap of CREAM in ETH terms

The attackers in question use this to manipulate the market while stealing assets owned by savers. This ugly side of DeFi was what Cream Finance experienced to such an extent that its TVL at the time of writing was just over $15 million.

While the TVL does not necessarily impact the crypto price, it does serve as a sign that users are wary of interacting with the protocol.

Leave a Reply

Your email address will not be published. Required fields are marked *