10/4 DeFi Analysis: AAVE VS COMP
In this analysis I will compare the two DeFi lending platforms Aave ($AAVE) and Compound ($COMP) in terms of:
Price action
Total Value Locked
DeFi dominance
The DeFi sector has been shaken by a string of bugs and programming errors that have arisen in the past month. Compound, a well known lending/money market protocol on Ethereum, has suffered back to back weeks of bugs including 345,000 COMP being sent to wrong addresses which equates to over $160 million USD.
First I will analyze Compound’s year-to-date (YTD) price action.
$COMP has seen a dramatic increase in value in 2021 and a significant recovery from May/June lows in Q3. We see a gradual price fall in the later half of September which could be said to correlate to Bitcoin falling in reaction to global macroeconomic fears (Evergrande, COVID, inflation, etc.) The next image below will show a chart of $BTC during the same time period. We will focus specifically on the correlation between $COMP and $BTC during Q3 2021.
In orange we see $BTC drawn over the blue $COMP chart. Much of the chart positively correlates except for late September/early October, where BTC begins to reverse and push towards $49k while Compound continues to fall in value. Next we will compare $COMP to a leading competitor in the lending protocol space, $AAVE.
Here we see a comparison between $AAVE (orange) and $COMP (blue) throughout 2021. While the patterns are fairly similar in terms of general trends, both of these protocols battled for DeFi dominance throughout the explosive growth in the space this year. While Compound saw an earlier and stronger recovery in the first part of Q3, AAVE began to overtake Compound towards the end of Q3. Both coins were affected by the news of Compound’s protocol errors in September as visualized by the downtrends observed in both charts.
We see price action correlate with total value locked (TVL), which is the measurement of how much capital is locked in the lending platforms. Both platforms see losses of several billion dollars throughout the month of September. Once again this can be attributed to overall macroeconomic fears, but the errors seen in late September had a profound effect on the TVL of both while BTC began to reverse to the upside.