The price of Compound (COMP) tokens is seeing a massive surge amid a manic week for the decentralized finance (DeFi) project, which included a listing announcement by U.S. crypto exchange giant Coinbase.
Compound TVL Crosses $400M TVL Milestone
With the number of lenders on the Compound protocol increasing rapidly, data from DeFiPulse shows the project crossing the $400M mark in total value locked (TVL). Barely a week ago, this figure stood at $100 million. Compound becomes the second lending protocol to cross the $400 million mark after MakerDAO.
This vertical climb in Compound’s TVL comes amid a token distribution event – a planned Coinbase listing that has seen the price of COMP tokens moon by over 100% over the last 24 hours, reaching a high of $240 on FTX exchange. As of writing these lines, COMP is trading around the price of $228. Yesterday, before the launch, COMP was sold for less than $65, that adds up to almost 270% ROI at the peak price.
Coinbase listing announcements have often caused altcoin prices to increase significantly with a corresponding dump, usually accompanying the hype.
Data from Compound also shows a corresponding massive increase in Tether (USDT) supply on the protocol: From approximately $43 million at the start of the week, Tether supply on Compound has crossed the $230 million mark as of the time of writing.
The frenzy surrounding the Compound protocol may receive a further spur following FTX, also announcing plans to list the token. An FTX listing will mean opening up the COMP token to derivatives trading.
Liquidity Mining, the New DeFi Talking Point
The current massive growth for Compound comes amid a growing buzz in liquidity mining. Also called liquidity farming, it is the latest token distribution mechanism in the DeFi ecosystem that sees earn tokens by contributing digital assets — “liquidity” — to the project. Liquidity mining incentivizes investors to put up funding for the DeFi project, which in turn spurs usage of the protocol.
For Compound, the massive growth in TVL shows borrowers and lenders being increasingly keen on putting up liquidity in exchange for COMP tokens in the expectation of future price growth. Venture capitalists are reportedly putting up a significant amount of equity in the project with likes of Andreessen Horowitz and Polychain Capital putting up $79M and $75M, respectively. Others like Paradigm and Dragonfly Capital have also invested $26 million and $7.3 million, respectively.
As reported by CryptoPotato recently, the blockchain software company ConsenSys announced plans to introduce a compliance service for DeFi projects and crypto exchanges. In February 2020, the value locked in DeFi increased by 260% in one year, after crossing the $1B mark. Currently, the total DeFi market stands at $1.35B in TVL.