Crypto lender Genesis reports uptick in stablecoin borrow rates amid 'yield farming' craze


As people jump on the "yield farming" bandwagon, one of the industry's largest lenders says it has seen an uptick in stablecoin borrow rates.

In essence, yield farming is a catch-all phrase for trying to secure the greatest possible yield from various DeFi products and protocols. And as the data suggests, COMP has fallen into the crosshairs of would-be farmers.

Crypto speculators have been pouring onto Compound to generate COMP, its governance token that went live on June 15. Users who lend or borrow COMP on Compound's platform can generate a yield, similar to how investors can earn a yield from a savings account. Unlike your standard interest-bearing account in traditional finance, interest rates on Compound can fetch users a high yield, depending on the price of COMP and the strategies employed.

To earn a yield on Compound, a speculator must deposit collateral. That collateral can be in the form of Ether (ETH) or any ERC20 token that Compound's platform supports, including stablecoins like USDC and USDT.

During the past week, Genesis Capital, a division of Genesis Global Trading, has seen a rise in short-term stablecoin and ERC20 borrow rates. This increase is an indication that people are increasingly looking to borrow crypto to use as collateral to earn a yield on Compound.

Joshua Lim, head of derivatives at Genesis Global, says this is tied to the "COMP harvesting trade."

"We also fielded a number of requests for COMP token borrow over the weekend as liquidity providers positioned inventory ahead of centralized exchange listings," he told The Block.

The price of COMP has grown by more than 770% since its launch, as shown in the graph below:

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Aug 11, 2021, 5:18PM UTC