Veteran DeFi projects COMP and MKR have risen day by day, this article explores the possible logic behind it

As Compound founder Robert Leshner announced the establishment of a new company, Superstate, he announced that he will use the Ethereum blockchain as an auxiliary record-keeping tool to create short-term government bond funds and create regulated financial products that connect traditional markets and blockchain ecosystems. Stimulated by this news, the Compound token COMP has performed strongly recently, and at the same time aroused the market's pursuit of the concept of RWA. MakerDAO (MKR) and Aave (AAVE) have performed well recently.

Although the concept of RWA has existed for a long time, narrative and currency prices are reflexive to each other, and enthusiastic users have been looking for logic for this round.

Different from the previous RWA (real world assets, that is, real world assets) asset on-chain, this round of RWA narrative is mainly because the yield of U.S. debt continues to be high (seeking proof), which has caused a serious impact on the already declining encryption market. DeFi, which is in a bear market, can hardly resist the siphon effect of U.S. debt with its stable base rate of return for institutional grades. Even the total stablecoin supply has declined, from a bull market high of $187 billion to $127 billion on July 3, according to DefiLlama.

Let's see how the market reacts to this rally.

Logic One: RWA

Since the Compound project itself has not announced any progress recently, the market has attributed the strength of COMP to RWA. The DAI Savings Rate (DAI Savings Rate), which MakerDAO uses its treasury for financial management, has a long history. As early as 2019, DAI launched DSR. It’s just that DeFi at that time still had such a wide user base and tens of billions of TVL (Total Value Locked).

As for Aave, some users said that as a larger lending platform than Compound, on the one hand, Aave can obtain the traffic of Compound, and on the other hand, Aave itself is likely to have a new narrative.

Logic 2: "Fossil Coin"

Not only these RWA tokens, but also Bitcoin Cash (BCH), Litecoin (LTC) and Bitcoin SV (BSV) are relatively strong in this round. The strength of BCH may come from being included in the US trading platform EDX. Under the influence of such tokens, some Twitter users attributed the narrative of such tokens to Dino coins. That is, the coin of the dinosaur (dinosaur) period, which is used to describe the currency left over from the ancient times.

Note: The first three are closely related to BCH, COMP and ADA projects respectively.

Logic 3: The project party’s repurchase expectation and the giant whale’s purchase

With the advancement of MakerDAO's new proposal to introduce a smart destruction mechanism, the market's expectations for MakerDAO's repurchase of MKR are getting stronger and stronger, which may be the reason why the market is optimistic about MKR. At the same time, MakerDAO founder Rune Christensen also began to purchase MKR in large quantities at the end of 2022, spending tens of millions of dollars. It is worth noting that, as an early investor in Lido, his main source of funds at that time was the sale of his token LDO.

Not only that, but there are also a large number of giant whales buying COMP. According to Twitter user Andrew T (@Blockanalia), some giant whales collected COPM worth about 11 million US dollars within 11 days, all of which were obtained from Binance. The associated address of its address was once related to IOSG, but Andrew also said that the address is likely to be an OTC address.

As for BCH, many Twitter users are discussing it, and the leading force behind it is Bitmain. However, it is worth noting that Wu Jihan, the co-founder of Bitmain, who had strongly admired BCH before, has left Bitmain. His mining company, Bit Deer, will be listed on NASDAQ on April 14, 2023. Bit Deer is still on 6 BitDeer shares have more than doubled since June 9, when a $1 million stock repurchase program was announced on June 16.

Note: The yellow line is the price increase of BCH

Run through or "dead cat jump"?

Whether it is the old DeFi such as Compound and MakerDAO, or the hot narrative like RWA, they have been repeatedly stir-fried in China. In this industry where everything is accelerated, the emergence and cooling of each hot spot mostly follow the same route, with rapid rotation in units of months or even weeks and days. In fact, in the encryption industry, many people's judgments on whether a product "runs through" are based on its currency price. The "running through" here no longer refers to whether the project can make money, but "whether I should continue to tell a story for it."

The rise of MKR and COMP this time is considered by many to be a change in the revenue structure of the agreement or a revision of the proposal, so it can feed back the currency price. But according to this logic, UNI should be the leader in this wave of gains. Of course, you can also say that UNI is not RWA, but when we observe the price of MKR after the deployment of the repurchase proposal, the benefits of RWA or proposal modification do not seem to bring about the expected continuous rise.

As another calm user commented, no matter how the market narrative "fits" the currency price, users need to have their own judgment. "Buy the rumor, Sell the news", no matter what market you are in, a good story is an endless source for people to continue to recharge their faith.