Past few days all our favourite crypto BAT is pumping hard. Almost a month ago BAT pumped and reached almost 0.26 USD and then fell to 0.19 USD. And now again it has almost reached 0.25 USD levels though it is in a bit of a decline right now. So what has prompted this pump. I mean in the end the simplest explanation is that buyers are willing to buy at a higher price so it is pumping BAT but is there another side to the story for this pump. To understand this we need to take a look at a new token which just got listed recently.
Take a look at the below image from Coinmarketcap.
COMP has surged from 93.20 USD to an ath of 337.05 USD and according to yesterday's close it is sitting at 280.38. I.E the coin surged more than 200 %.
Below are some statistics to show the run COMP has had in the very short timeline.
ROI of 179%. It definitely made some people very happy.
As per COMP whitepaper.
- WHAT IS COMP? Compound is a protocol on the Ethereum Blockchain that establishes money markets, which are pools of assets with algorithmically derived interest rates, based on the supply and demand for the asset. Suppliers (and borrowers) of an asset interact directly with the protocol, earning (and paying) a floating interest rate, without having to negotiate terms such as maturity, interest rate, or collateral with a peer or counterparty.
- WHAT DOES IT DO? Unlike an exchange or peer-to-peer platform, where a user’s assets are matched and lent to another user, the Compound protocol aggregates the supply of each user; when a user supplies an asset, it becomes a fungible resource. This approach offers significantly more liquidity than direct lending; unless every asset in a market is borrowed, users can withdraw their assets at any time, without waiting for a specific loan to mature.
- USE CASE? Individuals with long-term investments in Ether and tokens (“HODLers”) can use a Compound money market as a source of additional returns on their investment. For example, a user that owns Augur can supply their tokens to the Compound protocol, and earn interest (denominated in Augur) without having to manage their asset, fulfill loan requests or take speculative risks.
What does COMP have to do with BAT?
COMP has a reward scheme wherein, user will be rewarded with COMP tokens by depositing their tokens within the COMP infrastructure. These deposited tokens can then be used for lending and borrowing. Now since the prices of COMP started going on a parabolic run users started to lend and borrow huge amounts of tokens in order to FARM COMP tokens. And BAT has been a favorite there as its interest rates went on to go as high as 33%. Compare that with the banks which provide rates in the vicinity of 6-8% at best which do not even beat inflation.
There are speculations that to FARM COMP individuals are lending tokens and then the same individual is borrowing as well. And now COMP has become a risky choice as the users who have gotten interested in COMP because it has gone on this parabolic run are buying COMP at its ATH and now COMP has started to go down in its price.
These high interest rates on BAT has also led to BAT pumping because users are buying BAT to borrow and lend on Compound platform and enjoy the high interest rates.
As with all the early adopters, they either win big or lose big but there is no in between. Same is the case here as early adopters won big and now the second wave of users will come and they will lose a lot of money. COMP will decrease and then settle on to a stable price for some time and the interest rates on Compound platform will go on to become stable as well.
For BAT, i think it will also dip before starting another Bull run. So i'll be accumulating more BAT once it dips. BAT has given me nothing but profits every time i have accumulated it on dip.
Also check this tweet about what Vitalik said about this whole ordeal.
