Good yield hunting: COMP

So...the talk of the town in crypto is all about DeFi and now... "yield farming" lately.

Yield farming sir

The DeFi category isn't something new and have been around since 2017, with most people probably familiar with Maker and DAI. But it wasn't until recently that DeFi's Total Value Locked exploded to a new ATH to $1.47B.

And Compound's mainly responsible for it.

Welcome to the COMP mania

With Compound's token release last week, the protocol now belongs to the community and the COMP token is distributed to protocol participants (Suppliers & Borrowers) evenly.

COMP markets were quick to pop up with it first being traded on Uniswap , followed by a Poloniex listing and shortly after, Coinbase announced that they will be listing COMP and FTX will be having a Futures market for it.

Now, this is where the fun begins...once COMP tokens had a decent price tag, speculators and yield farmers dived in for the opportunity.

Much thanks to the limited circulating supply and thin orderbooks, COMP traded from $60 to a high of $370++ following Coinbase's announcement and Social volume just skyrocketed.

COMP social volume for last 3 months

There was high demand to get COMP into the markets and the only way to do it - via liquidity mining. People were highly incentivised supply/borrow on, yes, even borrowing at insane interest rates of 33% APY! This is largely due to COMP's price subsidizing it.

Also, at one point, if you were supplying USDT, you could earn over 100% in net APY! However, USDT yields have since been curbed thanks to new cooling down measures voted in by Compound governance.

Currently, BAT, WBTC and ZRX offers the highest yields.

Below is a calculator for working out COMP profits via lending/borrowing:

Risky business

It's important to note that DeFi is pretty nascent there are very real inherent risks involved:

  • Smart contract exploits/bugs/hack
  • Collateral getting liquidated
  • Stablecoin de-pegging

Unfortunately, in the midst of chasing yield, people tend to forget that and end up burning themselves like such:


The COMP effect

DeFi is Interconnected

While most of the action was on Compound's end, it eventually spills over to several projects associated either directly or indirectly and they too benefitted from the mania (Price appreciation or Increased volume).

BAT & ZRX - As altcoin collateral with highest yields on Compound

REN - Bringing BTC to WBTC on Compound, being a liquidity provider (LP) on pools

SNX - Alternative yield seeking option

LEND - Alternative yield seeking option, yield arbitrage

Curve.Fi (Not listed) - Alternative yield seeking option

Where to next?

As we near Coinbase's actual listing (22nd June) and more COMP supply enters circulation, it'll be quite a challenge but also interesting to see COMP maintain its price over $200. We could quite possibly see yield farming season end as quickly as it began.

More so, if BTC decides to make a move out of the 9000 - 10,000 range. All eyes will be on BTC instead.

That said, even if COMP is out of season, yield farmers may seek the next opportunity after seeing the farming success of COMP tokens, sniffing out other similar platforms like (token yet to be released), Balancer and mstable.

In the following days, we will be doing a deep dive into some of the coins in this Defi / Yield farming craze. Meanwhile, here's a watchlist on Sanbase that you can keep track of all things DeFi!

Stay tuned!

Thanks for reading!

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