🚨 Humpy the Whale Takes Over DeFi Protocol Compound

In July 2024, the DeFi space was shaken by a new high-profile event: a DeFi whale known as Humpy successfully took control of Compound.

What's behind these attacks? Let's find out.

📊 The Capture of Balancer

In the summer of 2022, Humpy gained control over most of Balancer's incentive distributions through the veBAL mechanism. This experience allowed him to become the second-largest holder of BAL tokens.

With Balancer, Humpy applied a two-step strategy:

1️⃣ Full control over the liquidity of a specific pool, securing the majority of liquidity mining rewards.

2️⃣ Securing a significant number of votes for the controlled pool to capture most of the incentive distribution.

Despite Balancer's efforts to counter the attack, their actions were insufficient.

⌨️ Current Assault on Compound

This time, Humpy focused his efforts on the idle COMP tokens in Compound's treasury, attempting to seize control through voting.

This movement involved attempts to redirect control using substantial volumes of COMP.

🐳 Humpy's "Golden" Strategy

Humpy did not directly participate in the entire operation but managed the process through a project called Golden Boys. This project, essentially a financial meme, used the ERC-20 token $GOLD.

The main product of the project was not aimed at creating structured financial products but at distributing liquidity incentives, including new issues of $GOLD and BAL rewards—all thanks to Humpy's influence on Balancer.

By creating a new Vault product called goldCOMP Vault, Humpy allowed users to stake their COMP tokens, transferring management rights to Golden Boys and receiving a goldCOMP certificate in return.

This certificate facilitated participation in the 99goldCOMP-1WETH pool on Balancer, minimizing trading losses and preventing minor losses.

⚠️ It Worked on the Third Try...

After setting this up, Golden Boys launched a governance attack on Compound, proposing to transfer a significant amount of COMP tokens to their multi-signature wallet to obtain management rights.

Despite the failure of the first proposal, they did not give up and proposed a second and then a third proposal, each time increasing the number of requested tokens to 499,000 COMP.

The proposal was eventually approved, allowing Humpy to effectively take control of Compound...

📌 P.S.

As of the time of writing, the Compound community has reached a preliminary agreement with Humpy, in which Compound will share 30% of its annual incremental total revenue with COMP token holders, making these tokens yield-bearing assets.

This incident highlights the need for DeFi products to reconsider their governance models to avoid similar problems.

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💸 USA on the Brink of a Debt Abyss?

The serious increase in the US national debt to $35 trillion, or $110,000 per American, raises concerns.

Economic forecasts suggest the debt could rise to $53 trillion by 2034.

In his latest article, Balaji Srivanasan raises important questions about the future of American finances.

Let's delve into the key points...

🇺🇸 Was there a similar situation in the past?

Debt levels comparable to the current ones were last recorded during World War II.

After the war, the debt fell to 25% of GDP in the 1970s, but the financial crisis of 2008 raised it to 52% of GDP 📈

💸 Reasons for the debt increase

COVID-19 triggered financial stimuli of more than $5 trillion, significantly increasing the national debt.

The cost of servicing this debt has doubled since 2021, exceeding $800 billion and even surpassing the defense budget.

💵 Decline in global demand for the dollar

The dollar's share in global trade has dropped from 70% to 60% over the last 25 years.

China has reduced its investments in US government bonds from $1.3 trillion to $0.8 trillion.

These two factors are cited as some of the main reasons for the fall of Bitcoin (BTC). You can read

more about this in a separate post.

❗️ Total volume of obligations

Including social security and Medicare, the total volume of US obligations reaches $175 trillion.

In comparison, the total value of leading tech companies is only $15.7 trillion 🕯

👀 So...

Arguably, the most important figure is $175.3 trillion — this is the real debt of the USA, taking all obligations into account.

This figure is from the US government's financial report of February 2024 and continues to grow 📈

As Srivanasan points out, addressing this issue requires unconventional approaches and innovations.

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🟠 Binance Research: Key Trends of the Month

Last month, the cryptocurrency market continued to demonstrate its volatility and dynamic development.

In the new Binance Research report, key events and trends that significantly impacted the market in July are highlighted.

🔸 Overview

July 2024 brought a 6.1% growth in the cryptocurrency market, driven by events such as the SEC's approval of nine spot ETH ETFs and Germany's sale of 50,000 BTC.

However, concerns remain regarding Mt. Gox repayments and the potential BTC sell-off by the U.S. government.

📈 Cryptocurrency Performance

🧬 Solana (SOL) saw a 30.5% increase, fueled by a 42.2% rise in DEX trading volumes and growing ecosystem activity.

✖️ XRP experienced a 27.6% increase, supported by the announcement of new indices and reference rates for XRP.

🔻 TRON (TRX) rose by 9.8%, entering the top 10 by market capitalization following the announcement of a new gasless stablecoin.

🪙 BTC rebounded by 9.7% after the easing of selling pressure and positive news from Donald Trump at the Bitcoin 2024 conference.

Not all cryptocurrencies performed positively:

AVAX and ETH saw declines of 1.2% and 1.6% respectively, while TON dropped by 12.2%.

🟡 Decentralized Finance (DeFi)

Total Value Locked (TVL) in DeFi grew by 3.5%, with the highest growth seen in CORE, Scroll, and Mantle.

Symbiotic's TVL surged by 283%, driven by partnerships with major protocols and interest in restaking.

🖼 NFT Market

The NFT market in July declined by 7.14%, with total sales reaching $430 million.

DMarket led the market with $16.2 million in sales.

While Solana collections showed volume growth, major Ethereum collections declined.

👀 Upcoming Events

August 2024 will see significant token unlocks that could impact the cryptocurrency market.

Among the largest token unlocks are:

🔺 $AVAX — $253.62M (2.42% of total supply), unlock date — August 20

🧿 $W — $150.76M (33.33% of total supply), unlock date — August 3

🌑 $APT — $74.76M (2.41% of total supply), unlock date — August 12

💲 $SAND — $67.35M (9.00% of total supply), unlock date — August 14

✖️ $IMX — $47.09M (2.11% of total supply), unlock date — August 9

These unlocks represent significant amounts that could affect the liquidity and pricing of the respective tokens.

🔸 In Conclusion

Despite positive news such as the launch of spot ETH ETFs and the growth of the Solana ecosystem, there are also concerning factors that may impact the market in the future.

Ongoing attention to Mt. Gox repayments and U.S. government actions indicate that market volatility is likely to continue 📊

It is important to stay informed of new trends and be prepared for changes that could significantly influence the market in the coming months.

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❓ Liquidity Fragmentation: A Hidden Threat to Crypto Markets

Discussions around volatility and price swings in cryptocurrency circles never seem to die down, but one fundamental cause often remains overlooked — liquidity fragmentation.

This hidden phenomenon can become a catalyst for significant price discrepancies and sharp market movements.

Let's dive into how liquidity fragmentation impacts markets and what it might lead to.

📊 Crypto Markets and Liquidity Fragmentation

Liquidity fragmentation occurs when trading volumes and liquidity are unevenly distributed across various exchanges. As a result, different platforms can exhibit varying prices for the same asset.

Although these discrepancies have lessened over time, they still occur, particularly on smaller, less liquid exchanges and during sharp market events 🕯

A recent market sell-off on August 5th served as a clear example:

BTC prices on Binance.US 😀 diverged from those on more liquid platforms. The situation was even more dramatic for less liquid altcoins.

Binance.US, whose trading volumes and liquidity have plummeted since the SEC lawsuit in June 2023, became the epicenter of these price discrepancies.

📉 Price Slippage and Market Shocks

Price slippage — the difference between the expected price of an order and its actual execution price—serves as one of the best indicators of liquidity. During market sell-offs, this slippage tends to increase, making it harder to execute orders at the desired price.

During the August 5th sell-off, slippage increased across most exchanges, but the most significant spike was observed in the BTC-JPY pair on Zaif and the BTC-EUR pair on KuCoin, where slippage exceeded 5%.

Surprisingly, even stablecoin-quoted pairs like USDT and USDC on BitMEX and Binance US showed a significant increase in slippage, despite their reputation as the most liquid pairs on crypto exchanges.

⌨️ Liquidity Concentrates on Weekdays

With each passing year, liquidity in cryptocurrency markets is increasingly concentrated on weekdays. This trend has intensified with the launch of spot ETFs in the United States 🇺🇸

Unlike traditional markets, which close on weekends, crypto markets operate 24/7, leading to heightened uncertainty over the weekends, especially if a sell-off begins on a Friday.

In recent years, weekend volatility has generally decreased, but the increased concentration of trading during weekdays raises the risk of sharp price swings on weekends during market stress.

For instance, last week, Bitcoin 🪙 dropped by 14% between Monday and Friday.

📌 Conclusions

Liquidity fragmentation is more than just a technical term; it's a real threat capable of causing significant market disruptions.

However, despite the challenges, crypto platforms continue to adapt, investing in infrastructure and reducing the cost of arbitrage opportunities.

During the recent sell-off, BTC-USD and BTC-USDT trades reached record levels on Bybit, and this trend is expected to continue developing.

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