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Cream Finance Cryptocurrency Jumps 65%: Is It the New Favorite Pick?
- CREAM’s trading volume increased by 378.65% in 24 hours and brought the price close to $75.
- Almost all holders of the cryptocurrency are whales, but Cream Finance’s TVL was disappointing.
CREAM, the native token of Cream Finance, a DeFi protocol, took the cryptocurrency market by surprise as its price increased by 65.25% in the last seven days. This surge came at a time when the prices of most cryptocurrencies were shrinking or consolidating.
At the time of writing, CREAM was priced at $72.25 with a market capitalization of $133.40 million. However, Cream Finance’s reach in the market seems limited considering that the cryptocurrency 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 the crave.finance [YFI] ecosystem. However, Cream doesn’t just work as a lending protocol for individuals. Instead, it also allows institutions and other protocols to access liquidity on its network.
Cream Finance is a permissionless and open source network and works for Binance Smart Chain users, Ethereum, Polygonand Fantom blockchain.
Not many people know this, but CREAM came to life after a hard fork of Compound finance [COMP] in 2020. In cryptocurrencies, a hard fork is a change to a blockchain’s network protocol.
When this happens, previous blocks become invalid as well as transactions. Additionally, users and nodes update to the latest version to remain compatible with the update.
Sometimes, a hard fork comes with a new token. Sometimes not. For Cream Finance, the 2020 split led to the development of the CREAM cryptocurrency.
With CREAM, users can stake, lend and borrow resources on the network. However, the token is not the only asset that can be used on the network. Cryptocurrencies such as COMP, ETH, YFI, some stablecoins and some other tokens can interact with Cream Finance.
“This group” is driving up the price
Following the recent price increase, AMBCrypto noted that Cream Finance has not announced any major developments. However, using data from IntoTheBlock, we observed an increase in whale activity.
Whales hold more dollars than a cryptocurrency. In most cases, tokens held by this group represent 1% of the total circulating supply.
According to data as of press time, approximately 94.74% of CREAM holders are whales. Of this group, 19.42% made 1,362 transactions in the last 24 hours.
Source: IntoTheBlock
This number is considered high whale activity and is enough to move prices significantly. As such, it seemed that the reason why Cream Finance outperformed other projects was due to this high whale activity.
Confirmation of this increase appeared in the trading volume. At the time of writing, CREAM’s volume increased by 378.65% in the last 24 hours.
On May 19, volume exceeded $100 million, according to Santiment data. With this volume, CREAM price closed at $75.
Moments later, the price dropped, indicating that some holders of the token were booking profits. While volume has fallen slightly from this point, it may not be enough to force a double-digit correction.
Source: Santimento
If the the volume continues to increase as the price rises, CREAM could drive another 15% increase that could take the price to $83.95.
However, a drop in volume could mean a drop in the token’s strength. In this case, the price could drop to $53.59, another area of interest.
Is CREAM reliable?
Despite the astonishing price increase, the Total Value Locked (TVL) indicated a bearish signal. TVL is an indicator of the health of a protocol.
If the parameter increases, it means that market participants are depositing resources into the ecosystem. When the TVL drops, it indicates an increase in withdrawals.
In this case, this could mean that participants no longer trust that the system will perform well. According to AMBCrypto’s analysis using DeFiLlama, TVL by Cream Finance was over $2 billion in 2021.
Source: DeFiLlama
But after a Flash loan attack in 2021, the metric has become a shadow of itself. For context, a Flash Loan attack occurs when you exploit a flaw in a protocol and obtain uncollateralized loans from a lending protocol.
Realistic or not, that’s it Market capitalization of CREAM in terms of ETH
The attackers, in question, use it to manipulate the market by stealing assets owned by depositors. This ugly side of DeFi is what Cream Finance has experienced, so much so that its TVL was just over $15 million at the time of this writing.
While TVL may not necessarily influence the price of cryptocurrencies, it serves as a signal that users are wary of interacting with the protocol.