Did it work or "dead cat bounce"? How is the market viewing the recent rise of the old-school DeFi?
With the announcement of Superstate, a new company founded by Compound's founder Robert Leshner, it has been announced that Ethereum blockchain will be used as a supplementary recording and storage tool to create short-term government bond funds and regulated financial products that connect traditional markets and the blockchain ecosystem. The Compound token COMP has shown strong performance recently in response to this news, arousing market interest in the concept of RWA. MakerDAO (MKR) and Aave (AAVE) have also performed well recently.
Although the concept of RWA has existed for a long time, the narrative and coin price have a reflexive relationship, and enthusiastic users have been looking for the logic behind this round of surges.
Unlike the previous on-chain of real-world assets (RWA), the narrative for this round of RWA is mainly due to the high yield of US bonds (to be confirmed), which has caused serious impact on the already struggling crypto market. Meanwhile, DeFi, which is in a bear market, is also facing difficulties in resisting the suction effect of US bonds on its institution-level stable yield. Even the total supply of stablecoins has decreased. According to DefiLlama's data, the total supply of stablecoins has dropped from the peak of the bull market, which was $187 billion, to $127 billion on July 3rd.
Let's see how the market views this round of gains.
Logic 1: RWA
Because there have been no recent updates from the Compound project itself, the market attributes the strong performance of COMP to RWA. MakerDAO's use of its treasury for financial management and the historical DAI Savings Rate (DSR) has been around since 2019 when DAI introduced DSR. However, at that time, DeFi did not have such a wide user base and over a hundred billion in TVL (Total Value Locked).
As for Aave, some users have stated that as a larger lending platform compared to Compound, on one hand, it can benefit from Compound's traffic, and on the other hand, Aave itself may also have a new narrative.
Logic 2: "Fossil Coin"
These RWA tokens are not only strong in this round, but also Bitcoin Cash (BCH), Litecoin (LTC), and Bitcoin SV (BSV) tokens. The strength of BCH may be due to its inclusion in the US trading platform EDX. Under the influence of these tokens, some Twitter users refer to these tokens as Dino coins. It describes the coins left over from the dinosaur era, used to describe ancient currencies.
Note: The first three are closely related to the BCH, COMP, and ADA projects.
Logic 3: Anticipated Buyback and Whale Purchases
With the advancement of MakerDAO's new proposal to introduce an intelligent burning mechanism, the market's expectation for MakerDAO's buyback of MKR is becoming stronger, which may be the reason why the market is bullish on MKR. At the same time, MakerDAO founder Rune Christensen also made significant purchases of MKR starting from the end of 2022, spending tens of millions of dollars. It is worth noting that as an early investor in Lido, his main source of funds at that time was the sale of his LDO tokens.
Not only that, COMP also has a large number of whale purchases. According to Twitter user Andrew T (@Blockanalia), there are whales who have collected about $11 million worth of COMP in just 11 days, all obtained from Binance. The associated addresses of the address were previously related to IOSG, but Andrew also stated that the address is likely to be an OTC address.
As for BCH, many Twitter users are discussing that the driving force behind it is Bitmain. However, it is worth noting that Bitmain's co-founder, Wu Jihan, who vigorously promoted BCH, has already left Bitmain. His mining company, Bitdeer, was listed on Nasdaq on April 14, 2023, and Bitdeer announced a $1 million stock repurchase plan on June 16. Since June 9, the stock price of Bitdeer has more than doubled.
Note: The yellow line represents the price increase of BCH.
Still Running or "Dead Cat Bounce"?
Whether it's Compound, MakerDAO, or the hot topic of RWA, these have all been reheated cold dishes that have been discussed repeatedly. In this industry where everything is accelerated, the emergence and cooling of each hot topic usually follows a similar pattern, rotating quickly on a monthly, weekly, or daily basis. In the crypto industry, many people judge whether a product is "running" based on its token price. Here, "running" no longer refers to whether the project can make money, but rather "do I still want to tell stories about it?"
The recent rise of MKR and COMP is believed by many to be due to changes in the protocol's revenue structure or proposal modifications, which can impact the token price. But according to this logic, UNI should be the leader in this wave of price increases. Of course, you can argue that UNI is not an RWA, but when we observe the price of MKR after the deployment of buyback proposals, positive factors such as RWA or proposal modifications don't seem to have brought the sustained rise that people expected.
As some level-headed users have commented, regardless of how the market narrative "adapts" to token prices, users need to make their own judgments. "Buy the rumor, sell the news" - in any market, good stories are the endless source that keeps people recharging their faith.
