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Crypto Stablecoin Report 09: Analyze the lending leverage of Compound

Original link: https://bihu.com/article/1484780386

Original publish time: July 14, 2020

Original author: HaiBo Jiang, researcher of MYKEY Lab

We released MYKEY Crypto Stablecoin Report to share our interpretation of the development status of stablecoins and analysis of their development trends to help the participants in the crypto market stay updated on the development status of stablecoin. The MYKEY Crypto Stablecoin Report will be published every week, looking forward to maintaining communication with the industry and exploring the development prospects of stablecoin together.

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  • Last week, the circulation of USDC increased by 72.3 million, and the market capitalization reached $1.111 billion.
  • The circulation of DAI increased by 27.91 million, and the market capitalization reached $200 million.
  • The circulation of USDC and DAI has continued to increase recently, and the additional issuance of USDT has been suspended.
  • $1 DAI can be generated up to $1.82 DAI and $1.36 ETH deposits, $0.82 DAI and $1.36 ETH loans, and repeated deposits and loans between DAI and ETH can be theoretically generated up to 3.18 times of deposits and 2.18 times of loans.

1. Overview of Stablecoin Data

First, let’s review the changes in the basic information of the various stablecoins in the past week(July 4, 2020, ~ July 10, 2020, same below).

Market Circulation

Source: MYKEY, Coin Metrics

The circulation of stablecoins continues to grow, and the current market capitalization of major stablecoins has reached $12.235 billion.

Source: MYKEY, Coin Metrics

In the past week, the market capitalization of stablecoins has increased by approximately $85.15 million. USDT has not been additionally issued on several public blockchains, the circulation of USDC increased again by 72.3 million, with a market capitalization of $1.111 billion. The circulation of DAI increased by 27.91 million, with a market capitalization of $200 million. The circulation of GUSD increased by 250,000 and the circulation of PAX, BUSD, TUSD, and HUSD decreased by 6.6 million, 2.85 million, 4.28 million, and 1.59 million. The circulation of USDC and DAI has grown steadily in the recent period.

The Number of Holding Addresses

Source: MYKEY, DeBank

In the past week, the number of stablecoin holding addresses on Ethereum continued to decrease by 1,848, mainly due to the decrease in the number of holding addresses of USDT.

Source: MYKEY, DeBank

The number of holding addresses of USDT decreased by 2,772, the number of holding addresses of USDC and PAX decreased by 677 and 340, and the number of holding addresses of TUSD and DAI increased by 9 and 1,932.

The Number of Active Addresses

Source: MYKEY, Coin Metrics

The number of active daily addresses of stablecoins last week decreased by an average of 6.05% compared to the previous week, and the number of daily active addresses of USDT decreased by 7,781 compared to the previous week.

The Number of 24-hour Transactions on the Public Blockchains

Source: MYKEY, Coin Metrics

Compared with the previous week, the number of daily transactions of major stablecoins decreased by an average of 1.74%.

The Number of 24-hour Volume of Transactions on the Public Blockchains

Source: MYKEY, Coin Metrics

Source: MYKEY, Coin Metrics

The volume of transactions of major stablecoins on the public blockchains last week increased by 0.9% compared to the previous week, and the volume of transactions of DAI accounted for more than before.

2. The theoretical leverage multiple of Compound

Compound became the largest DeFi lending platform after starting distributing the governance token COMP last month. The total deposits of DAI in Compound are currently $865 million and the total loans are $782 million, but in fact, the supply of DAI in Maker is only 201 million.

In reality, banks match the deposit and loan needs of different people. It is rare that a person deposits money in a bank and borrows from the same bank, while this situation often occurs in Compound. And next, we will explore the maximum leverage that arbitrageurs can add to maximize the use of funds.

In Compound, there is a parameter called Collateral Factor, which represents the loan ratio available to mortgage the asset. The collateral factor is between 0–1, and different assets have different collateral factors. Taking DAI and ETH as examples, DAI has a collateral factor of 75% and ETH has a collateral factor of 60%. Mortgage 1DAI can lend $0.75 worth of ETH, then mortgage the $0.75 worth of ETH and you can lend $0.45 DAI, mortgage DAI to borrow ETH, and so on. Using the sum formula of geometric series, we can calculate that $1 DAI can be generated up to $1.82 DAI and $1.36 ETH deposits, $0.82 DAI and $1.36 ETH loans, and repeated deposits and loans between DAI and ETH can be theoretically generated up to 3.18 times of deposits and 2.18 times of loans. It should be noted that this is only a theoretical value. In actual operation, it may be liquidated due to price fluctuations if borrowed at the full collateral factor. Compound itself has the meaning of compound, the name of the project implies Compound Interest means that the project side does not oppose repeated borrowing by the same person. To get token rewards of COMP, arbitrageurs will use funds to deposit and loan repeatedly, but there is no such demand in real life.

This is what we’re sharing in this MYKEY Crypto Stablecoin Report, welcome to stay tuned for follow-up crypto stablecoin reports. We will provide more interpretations of the development status of stablecoins and analysis of their development trends to help you stay updated on the development status of stablecoin in the follow-up report.

PS: MYKEY Lab has the final right to interpret the content of the article, please indicate the source for the quotation. Welcome to follow our official account — MYKEY Lab: MYKEY Smart Wallet.

Past review

MYKEY Crypto Stablecoin Report 01: USDT continues to gain momentum as market capitalization exceeding $10 billion

MYKEY Crypto Stablecoin Report 02: USDT suspended additional issuance and the usage scenario of USDT in Tron is single

MYKEY Crypto Stablecoin Report 03: Where are the users of DAI?

Crypto Stablecoin Report 04: Tether additional issued 300 million USDT, commenting on various decentralized stablecoins

Crypto Stablecoin Report 05: DAI Maintains Steady Growth, Exploring Use of DAI by Users of Centralized Exchanges

Crypto Stablecoin Report 06: The latest 13 additional issuances of USDT all occurred on Tron, driving the increase use of Tron

Crypto Stablecoin Report 07: Security Analysis of Stablecoins

Crypto Stablecoin Report 08: Interpretation of Digital Dollar Project

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