The rapid price growth of so-called decentralized financial tokens (DeFi) raises new suspicions after an alternative currency has reached USD 427.
In a strange sequence of events that still take place in exchange, The DeFi Compound (COMP) token made huge gains before dropping almost 50%.
Research warns of COMP token short circuit
Compound, an Altcoin ERC-20 on Ethereum, was launched on the Coinbase Pro exchange this week. However, As soon as trading started, sales rose under pressure to create wild volatility.
In particular, a company that was supposed to be an early investor in COMP started sending large amounts of tokens to Coinbase.
The identity of the target address remains uncertain, but corresponds to the detective work of Galois CapitalMovements indicate organized liquidation. Thereafter, the COMP / USD pair fell from a high of $ 427 to pressures lower than $ 235.
“It appears that this investor will have another ~ 25,000 or possibly ~ 87,500 COMP if you jump back in the chain,” added Galois, linking to another destination.
“It would be interesting to see if any of them switch to @coinbase. This probably indicates short-term selling pressure.”
1-week chart of the COMP / USD pair. Source: CoinMarketCap
Are DeFi the 2020 ICOs?
While COMP clearly fits the description of a short-term bubble caused by the Coinbase listing, reservations about DeFi as an ecosystem have increased.
This week alone, the DeFi Balancer (BAL) token rose by more than 200% after its announcement on the mainnet.
As with interest in ICO tokens (initial coin offering) and then stablecoins, a number of projects suddenly appear, along with sudden jumps in the value of their internal cryptocurrencies. The market itself is largely speculative.
Others found that In contrast to the ICO phenomenon, Ether (ETH) has not yet benefited from the token boom.
“The last time an Ethereum use case became parabolic (ICO), ETH became parabolic,” said the founder of Mythos Capital. Ryan Adams.
“This time, an Ethereum use case becomes parabolic (DeFi), but ETH isn’t in action.”
As Cointelegraph reported, even legacy tokens like Bancor (BNT) and Maker (MKR) have seen double-digit growth in the past week.