A Coinbase Pro Listing and Other Eye-Opening Data Points on Compound’s Surge in Demand

It’s hard to pick just one stunning fact about the market suddenly created by the issuance of Compound’s COMP token.

Since Monday, when the governance token started being released to users of the decentralized lending platform, the total value locked (TVL) on Compound has broken $200 million for the first time, according to DeFi Pulse, and it’s decisively on its way to $300 million. At $283 million as of press time, the prior all-time high for Compound’s TVL occurred Feb. 23 when it reached $183 million.

The question, of course, is why. 

Related: Blockchain Bites: COMP x2, Reddit Scales and Factom Goes Bankrupt

This has been a wild week in decentralized finance (DeFi) as users scramble to earn the daily rewards of COMP, currently priced at $123, according to data site CoinGecko. As previously reported by CoinDesk, users are depositing one token (usually USDC) and borrowing another (usually USDT), because Compound emits fresh COMP every day to both lenders and borrowers. 

In many cases, borrowers turn around and convert the borrowed USDT to USDC in order to repeat the operation and maximize their COMP earnings. 

Read more: COMP’s Sudden Growth Has Swamped a DEX Dealing Only in Stablecoins

From 12:00 UTC to 13:00 UTC on Thursday, Compound’s TVL shot up $50 million.

Related: OpenZeppelin Discloses ‘High Severity Vulnerability’ in DeFi Wallet Argent

It’s not unfair to say the DeFi market has been completely overtaken by Compound this week. A few relevant data points:

• Coinbase Pro announced Thursday it will list COMP next week. CoinDesk has not been able to confirm yet whether or not this is Coinbase’s fastest listing to date. Coinbase invested in Compound’s $8.2 million seed round in 2018.
• More than 10% of the total supply of USDC, the stablecoin created by Circle and Coinbase, is currently locked on Compound.
• The total amount of tether (USDT) on Compound is up almost 8,000% since June 11, noted crypto investor Spencer Noon, who also added a note of caution. 
• CoinFlip, which runs a bitcoin ATM network in the U.S., announced Thursday it would list USDC on its machines, partly due to COMP-related demand, a spokesperson confirmed to CoinDesk.
• Every day since its initial release, COMP has had more volume on the stablecoin exchange Curve than any day prior, though it has slowed down since Tuesday evening.
• Compound is the only DeFi market besides MakerDAO to break $200 million in TVL, according to DeFi Pulse. 

As long as the token’s price remains above $100, the effective market cap of COMP is over a billion dollars, though it should be noted that this price is skewed by the fact that so little of the supply is actually liquid. 

To recap, 2,880 COMP tokens are released to borrowers and lenders on Compound each day. Only 9,231 of the 4.2 million set aside for community members have been released so far, according to the Compound website. 

Read more: First Mover: Compound Has Been a DeFi Darling. Its New Token Is Priced Accordingly

Haseeb Qureshi, managing partner of Dragonfly Capital, put the long-term prospects of Compound and the short-term reality of its governance token into context in an email to CoinDesk Thursday:

“Given that COMP represents a potential claim on future interest paid, as more collateral onboards to Compound, this should make COMP more valuable as more lenders/borrowers show up. (In the short term though, most of COMP’s price fluctuations are a function of the tiny float. Think Zcash early days. I wouldn’t read too much into the current price.)”

Related Stories

• First Mover: Compound’s COMP Token More Than Doubles in Price Amid DeFi Mania
• ParaFi Invests in Kyber Network as Buzz Grows Around DeFi Projects

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.