Soaring from 0.06% to 30%, is there actually a crisis behind BAT's high returns?
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), by Kyle, published with permission.
Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
, by Kyle, published with permission.QKL123
With the start of COMP allocation, Compound has become the brightest newcomer in the entire cryptocurrency field, even Bitcoin and ETH 2.0, which have received the most attention in the past, have been eclipsed. After the distribution of COMP started on June 15, and after Coinbase announced the listing of COMP in a flash, COMP seemed to be on a rocket and rose 10 times. According to DeFiMarketCap data, the price of COMP is $316, and its market cap is currently $3.16 billion.
The skyrocketing price of COMP has attracted a large amount of capital to flow into the Compound ecosystem. According to DeFipulse data, the lock-up scale on the Compound platform has reached 611 million US dollars, accounting for 40.11% of the entire DeFi lock-up scale. According to Debank data, Compound borrowed a total of 321 million U.S. dollars, far exceeding the second-ranked Maker's 123 million U.S. dollars.
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The high returns brought about by the skyrocketing COMP has triggered a chain effect on the Compound platform. Compound currently supports lending services for 8 tokens: BAT, DAI, ETH, Augur, USD Coin, Tether, WBTC, and Ox. Users who deposit these tokens on Compound to provide liquidity can get COMP allocations.
According to data from the Compound platform, BAT lending and lending rates have skyrocketed in the past two days. On June 22, the lending rate of BAT on Compound was 23.77%, and the lending rate was 31.88%. From the launch of Compound on May 23 to June 18, the lending and lending rates of BAT have been only around 0.06% and 2.75%.
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The skyrocketing rate of BAT lending has attracted users to deposit and borrow BAT from Compound. According to TokenInsight data, the amount of BAT credits has increased from approximately US$50,000 to US$84 million in the past 4 days.
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The loan scale of BAT on the Compound protocol has soared recently丨Chart source: TokenInsight
The skyrocketing demand for lending will naturally trigger the demand for BAT on Compound. Users began to transfer a large amount of BAT to Compound to provide liquidity, which stimulated the soaring interest rate of BAT lending, followed by a rise in the price of BAT. According to the data of QKL123, the current increase of BAT is 5.64%, surpassing BTC, ETH and other mainstream currency.
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The skyrocketing price of COMP has attracted a large number of profit-seekers, and risky assets such as BAT are vulnerable to price fluctuations and even liquidation risks. Regarding the soaring BAT lending rate, industry analysts generally believe that it is necessary to be alert to the risks behind it.
In an interview with Babbitt, TokenInsight analyst Johnson said:
"The interest rate model on Compound is different. Some large investors have seen opportunities. USDT is relatively more inclined to legal tender, while BAT is relatively easy to fluctuate. Therefore, under the same utilization rate (UR), BAT's Interest will be higher than USDT. Considering enough interest rate difference between #USDT and #BAT, some liquidity mining participants may now switch from #USDT to #BAT.
On Compound, #USDT has a flatter interest rate model than #BAT when Utilization (UR) < 90%, and a steeper trendline > 90%.
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Chart source: TokenInsight
So someone figured out why not give/lend via #BAT for a higher interest rate for COMP rewards at the same UR?
Earning 24% (BAT) instead of 8.5% (USDT) opens the door to price risk, you could theoretically hedge it by taking an equivalent short position on #BAT, of course risk management is The key, because if the price of BAT fluctuates too much, it will cause some people who use stablecoins to mortgage BAT to borrow BAT, if they do not have time to cover their positions and repay their loans, their positions will be liquidated. "
dForce founder Mindao Yang said,
