Massive Compound bug rattles the 'weak hands'
In case you missed it, the latest update to Compound Finance introduced a bug allowing users to claim millions of COMP tokens as rewards.
According to some sources, an excess of $50 million worth of COMP has already been (mis)claimed, with one user suggesting he was sitting on just over 70 million unclaimed COMP in rewards:
So what has the bug done to COMP's on-chain activity?
Unsurprisingly, today has seen the largest spike in active deposits (382 in the past 24 hours), or addresses used to funnel COMP to known exchange wallets:
The spike suggest a strong uptick in sell-side pressure, likely prompted by a combination of lucky claimants and holders that are worried how the bug will reflect on COMP's price action.
Another sign of increased sell-offs can be seen in COMP's exchange inflow, as over 164k COMP has hit known exchange wallets in the past 24 hours - its highest level since January:
Finally, the total amount of COMP on known exchange wallets has vaulted upwards today, jumping to a 40-day high 8.5% at the time of writing:
Basically, there seems to be a good chunk of added sell-side pressure for Compound's native token since the bug. While expected, the scale of it already feels a bit panicky and might suggest some weak hand shakeout, especially as COMP slid close to the $300 mark.
While I'm not necessarily saying that COMP is oversold, it's worth noting that it's 30-day MVRV ratio is now well into negative (-12.5%), though there's still some space before it reaches historical lows:
Still, some panic-induced profit taking might help kickstart COMP's price recovery in the midterm.
For this, I'd also keep an eye on COMP's social metrics; at the moment, our data suggests COMP-related sentiment has become increasingly bullish since the news, possibly signaling a strong 'buy the dip' mentality by retail traders. Might mean there's still some room to the downside before the crowd loses all hopes of making a quick buck off the Compound FUD:
Watch this space.