@SBF_Alameda had a great thread explaining how Compound works and what its cXXX tokens and COMP do. But understanding how these work is only half the battle -- how do we trade them? Here are my thoughts. https://twitter.com/SBF_Alameda/status/1273716158303055872?s=20

COMP’s price (and the rest of the DeFi coins’, to a slightly lesser extent) is going insane, to say the least. There’s a number of effects at play here (admittedly, I understand some of these better than others).

The first effect is the one impacting all of DeFi, and the effect seems basically to be “DeFi is the future,” or something. This is the effect which a) I think has the most long-term implications and which b) I understand the least well.

A related effect which is specific to COMP seems to be “Defi is the future, but Compound is The Future.” If you think I’m using rhetorical capitalization to mask that I recognize this is people’s opinion but don’t feel I understand why well enough to explain it, good call.

To be clear, I’m not claiming anyone who thinks either of these things is wrong -- just that I don’t feel qualified to evaluate whether they’re right, and knowing that lots of people think them is enough to be able to trade it anyway. I’m also exaggerating a bit. :P

Getting access to the governance token on what’s currently the hottest DeFi lending platform has a lot of appeal to these people, and so lots of people are buying it price-insensitively, which is causing quite a volatile ride. Those who speculate this will happen are buying too.

Another effect is the Coinbase listing effect -- I talked about there in this thread, and in particular I think the answers to my last tweet explains a lot of what’s happened. https://twitter.com/AlamedaTrabucco/status/1264509400636461056?s=20

Coinbase has quite the bar for listing a token, especially one that seems as idiosyncratic in how its value works as COMP. That COMP cleared that bar is pretty plausibly a really bullish sign, and might confirm the view that COMP is The Future.

Further, COMP is listed on very few other platforms, so when it lists on Coinbase (that’s in a few hours, at this point) it’s plausible that it’ll be a lot of people’s first access to the token, so lots of people might have bought it up expecting that.

But wow, is it up a lot since the Coinbase announcement -- way more than any other of their recent announced listings were pre-listing. It had all these other effects working for it, so it’s hard to say whether it’s over-bought -- we’ll see in a few hours!

All these effects have worked toward COMP going up -- there’s also one which has some impact the other direction, which is that people are mining 2880 COMP tokens per day, at least some of which should be making its way to the markets to be sold.

The fact that COMP is skyrocketing even despite this indicates that there’s a *lot* of buying interest (or that a lot of miners are holding, also believable), but medium-term and beyond (and even short-term) this will represent selling pressure on the token.

So, where does all this leave us? Short-term, I expect a lot of volatility to keep up as the DeFi craze keeps up (and especially for the next few hours headed into the Coinbase listing), and I think it’s tough to predict delta-wise what will happen as the listing takes place.

Beyond that, COMP’s future will mostly come down to whether the people who think DeFi (and COMP) are the future turn out to be correct -- if they are, COMP will likely outpace the selling pressure from miners, and if not then probably not. Will be exciting to watch play out!