COMP’s Sudden Growth Has Swamped a DEX Dealing Only in Stablecoins

One of the newer entrants to the decentralized finance (DeFi) space, Curve, is riding the wave of demand for the freshly issued Compound governance token, COMP, which has surged to a $774.3 million market cap since first being distributed on Monday.

Curve is an automated market maker devoted exclusively to stablecoins. On Sunday, it saw $3.5 million in daily trading volume, according to its self-reported stats. On Monday that shot up to $12.6 million; as of this writing on Tuesday, it’s at $23.3 million in trading volume over the last 24 hours, a roughly 7X gain.

According to Curve founder Michael Egorov (also a co-founder of encryption company NuCypher), this is largely driven by demand for COMP.

“People started putting USDC as collateral on Compound, taking USDT, swapping on Curve to USDC to put as collateral on Compound [and] doing that up to 30 times to earn COMP with leverage,” Egorov wrote CoinDesk in an email. 

That’s because Compound gives the most COMP each day to the markets with the most interest. Right now, among stablecoins, those are USDC and USDT. In other words, users put in USDC, borrow as much USDT as they can, switch it on Curve for more USDC, put that in Compound as well so they can borrow more, take out additional USDT and repeat until they have capped out their leverage. This allows them to absolutely maximize their activity on Compound as both a borrower and lender, which earns COMP on both sides.

COMP is currently trading at $78.33 as of press time, according to Uniswap.Curve currently has $16.2 million in deposits, down from a high of $17.2 million reached this weekend. Deposits on Compound have gone from $97.7 million on Sunday to $159.5 million at press time, according to DeFi Pulse.