Why the rally for Compound Finance (COMP) may not be over

COMP/USDT

BiKi Exchange has just listed Compound token(COMP) less than 2 weeks ago and there has been a ton of buzz generated over it being the juggernaut in the DeFi Space. The DeFi governance token experienced the ‘Coinbase Effect‘ when announcement was made on 18th June. The price had since made over 200% in the recent weeks, before having its gains erased by speculators taking profits off the table. The token then found visible support at the low $200’s.

H4 view on COMP/USDT on BiKi Exchange

Token Summary

In essence, the Compound Finance platform gives you the ability to borrow and lend tokens. In Compound, users contribute to a shared pool of tokens, from which lenders can receive a debt. Lenders can repay the debt at any time, as long as they maintain enough collateral. In case their debt becomes under-collateralized, users of the protocol can then default the lender’s debt by selling his assets in an auction. In the world of decentralized finance, you don’t have to trust anyone, you just have to trust the math. Unlike traditional banking institutions (in which your funds are not held by a single custodian), your funds will be held by smart contracts, whose actions will simply be executed once specific conditions are met.

Taking a quick look at the Tokenomics

COMP takes up a whopping 38% of the entire DeFi space, translating to a sizable quantity of just over $637 million already locked in the Compound protocol. This is an impressive feat considering that COMP Finance did not undergo an ICO or public sale to raise their initial capital.

Compound's COMP Becomes Most Valuable DeFi Token, but There's a 'But' 103
image from coingecko.com

Out of its max supply of 10 Million, only 2.7 Million of the tokens are in circulation as of now. By general economics, a subsequent increase in supply should gradually drive the price of COMP down from its current $226.82.

Technical Analysis

Since the charts are still relatively fresh in the markets, there aren’t enough past information to establish any form of key levels on the larger timeframes(Weekly/Daily).

H4 View

H4 chart of COMP/USDT on BiKi Exchange

Taking a closer look and drawing the trend-lines the way as mentioned in the video from the first post:

  • We can see that there is a clear break of the descending trend-line followed by a retest.
  • The retest area coincides with the resistance-turned support zone formed between $225-240, giving us additional confluence that this particular area can potentially be a reversal zone.

H1 View

H1 chart of COMP/USDT on BiKi Exchange

Do note that lower timeframes such as H1 are highly manipulated, we should always be mindful of the overall trend in the larger timeframes to minimise the chances of going against the trend.

“A Trend is your Friend, until it Ends.”

There are a ton of things going on in the picture above so lets take things through systematically, baby steps:

  • Taking the start of the fibo from the Higher low point to the Higher High point, we can see that price has rejected off the key fibo zone between 61.8 to 78.6 level, WHICH, what a surprise it is the rejection area we’ve seen earlier on in the H4 chart.
  • 17 & 50 EMA has made the ‘golden cross’, indicating the short-term (potentially long-term) trend has changed from bearish to bullish.
  • Draw the bullish trend-line for the most current
  • We can see that there is an extremely precise minor level (using the trick as mentioned in the BXTB analysis) formed at the price $235.5.
  • The minor level is soon to coincide with the bullish H1 trend-line drawn, which forms confluences.

OVERVIEW (LONG)

Combining both fundamental and technical analysis on this token, we can establish a strong bullish conviction for COMP. The accelerating growth of users seeking to earn high interest for their crypto-lending services, has and will continue to fuel towards the mass adoption of the Compound Finance platform, which will then drive up the usage of their native token, and subsequently, its price.

Disclaimer: The above does not constitute as investment advice. Do note that trading cryptocurrencies (or any other financial market) involves substantial risk, and there will be a potential for loss. Your trading results may vary. Please practice the proper risk management to avoid risks of approaching account zeroing and liquidation.

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