Harvest season has arrived early for FARM holders.
The price of FARM, the governance token of decentralized finance protocol Harvest Finance, has increased by 201% over the past week and 46% in the past 24 hours to reach $264, data from crypto metrics platform CoinGecko shows.
Harvest Finance is a DeFi protocol that specializes in yield farming, a highly lucrative but also risky way of investing crypto by locking up holdings in the protocol’s smart contract. Locking up tokens generates rewards—a fixed or variable interest—as crypto provides liquidity for loans.
FARM, the protocol’s governance token, is also a tradable asset.
The token’s rise this week follows its listing on Coinbase yesterday, a major cryptocurrency exchange and certainly one of the most recognizable especially in the US.
The phenomenon of a coin’s price going skyward upon a Coinbase listing is known as the ‘Coinbase Effect’. It was first observed in 2017 after the exchange listed Bitcoin hard-forks Bitcoin Cash and Litecoin and their prices doubled.
Major Boobage, a pseudonymous Harvest Finance community leader, told Decrypt that the community leaders issued a call to farmers to deposit FARM into their Coinbase accounts to ensure there was enough liquidity from a diverse group, which likely contributed to the price surge. “We suspect the small cap drove speculation, with people seeing more upside than some larger projects,” he said.
Fortunately for FARM, its listing coincided with a bullish turn in the cryptocurrency market; Bitcoin and altcoins began to recover from the summer slump this week. The sight of bulls is key for the Coinbase Effect to kick in—it often turns out to be a dud if the Coinbase lists the coin when the market is down, as Dogecoin experienced last month, or XRP in February 2018.
Attack on the farmers
Last year’s harvest season wasn’t so bountiful for Harvest Finance; the protocol suffered a flash loan attack of $24 million in October 2020.
The attacker siphoned stablecoins USDC and USDT from Harvest’s liquidity pools by exploiting an error in the protocol’s smart contracts. Harvest Finance placed a $100,000 bounty on the attacker, who was never found.
To incentivize would-be attackers to put their skills to a better use, Harvest offers a $200,000 reward for anyone who spots an error in its code.
Red, an anonymous community manager at Harvest Finance, told Decrypt that following that attack, Harvest Finance reimbursed users with another of its tokens, GRAIN, and used profits to buy back and burn GRAIN tokens.
Since then, Harvest Finance has commissioned several security audits. The latest, from February 2021, found no major weakness, Red told Decrypt. The protocol is audited by Least Authority, Haechi Audit, PeckShield, and Certik.