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Are COMP Early Backers Racing for the Exits?

flipsidecrypto Jul 17, 2020

Take a look at the active supply of COMP tokens moving on-chain from June 14th to July 13th. 

More data available on the Flipside Data Cooperative

Legend

COMP is an Ethereum token that governs the Compound protocol. The protocol allows anyone to supply or borrow Ethereum tokens through a decentralized market. Suppliers earn interest on the crypto they supply to the protocol and borrowers pay interest to borrow it.

Borrowers/Lenders: people interacting with the Compound protocol (i.e. lending and borrowing crypto assets on the defi platform). 

Other Wallets: other addresses that hold COMP tokens but are not using the Compound protocol. 

Large flows of COMP to exchanges accompany initial listings. 

June 19th: A team or investor-controlled wallet moves a large amount of COMP to an intermediary wallet. 

At the same time we can see a large movement from the Compound team to DeFi. This correlates with the unannounced listing of COMP on Uniswap

June 22nd: Cryptocurrency exchange Coinbase starts accepting inbound transfers of COMP into users’ Coinbase Pro accounts. The wallet that was active on June 19th then sends all of its tokens (187,500 COMP) to Coinbase on June 22nd. This is the largest transfer to Coinbase, though it represents less than 2% of the total COMP supply (of 10MM). This is likely either initial market making, Coinbase Custody, or liquidation behavior. 

June 23rd: Trading on Coinbase begins. Price drops the same day, possibly driven by this one investor liquidating. 

June 24th: Another investor sends his COMP to Coinbase. Notice the large inflow of pink bubbles from “Team/Investors” that turn blue as they go into Coinbase. 

June 25th: Binance lists Compound (COMP) and opens trading on its exchange. We immediately see a large inflow of COMP to Binance. 

Note that we are highlighting active supply changes here, not balances. Many other large investors still have their assets.

Most COMP is held by wallets that are not engaging in yield farming. 

Compound has been all over the news lately, and its successful launch kickstarted the DeFi yield farming phenomenon. On Monday, the protocol even broke a billion dollars in total assets borrowed. 

But while the lending protocol has itself been used by both large and small investors to earn returns, most of the COMP supply is actually held by speculators who are not active users of Compound. 

Consider the amounts listed next to the two user cohorts on July 13th: Compound users hold 23.8K of the active supply, while wallets who are not using the protocol hold a whopping 680.4K. 

Compound users are getting ~2800 COMP in rewards per day. And that for the next 4 years. This is rather small compared to the outstanding supply which continues to grow. 

The fact that many farmers continue to liquidate their earnings could cause the price of COMP to drop.

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