Compound (COMP) Witnesses a Stellar 20% Price Uptick Over the Past Week

The cryptocurrency market surged higher on Thursday, with the price of Bitcoin (BTC) breaking above the $27,000 level alongside easing macro pressures. BTC earlier rose to just shy of $27,300 and, at press time, has been trading at $26,942.

The total crypto market cap also jumped to $1.12 trillion. With this, the crypto fear and greed index is back in the neutral zone with a score of 48/100. 

This crypto advance happened alongside a modest rebound in US stocks as the greenback slipped, the 10-year Treasury yield pulled back from a 16-year high, and oil retreated from its 2023 high.

A rally in Bitcoin price is good for listed digital asset companies, according to crypto services provider Matrixport. If BTC were to climb to a new peak of $70,000, an investor would realize a return of only 167%, which could be increased by buying a diversified portfolio of publicly listed bitcoin mining companies such as HIVE Digital (HIVE), Bitfarms (BITF) and Iris Energy (IREN).

These stocks are currently trading at a 33% discount to Bitcoin's price and offer 52% upside, the company said in a report on Thursday. Matrixport's regression analysis shows that the relevant ten stocks would be valued at 572% higher if Bitcoin reaches a new all-time high (ATH).

“For the sake of diversification, opting to invest in a selection of discounted bitcoin mining stocks or tokens with substantial growth potential could possibly represent the ultimate bet for 2024,” wrote Markus Thielen, head of research.

Currently, crypto derivatives traders are preparing themselves for Friday's quarterly and monthly options expiry. Today, some $4.8 billion worth of BTC and ETH options will expire on key derivatives exchange Deribit. For the expiry of 118,000 Bitcoin options contracts, the max pain point is $26,500. Meanwhile, for the expiration of 1.1 million Ethereum contracts, the max pain point is $1,650. 

Institutional crypto exchange FalconX noted in a market report this week that open interest on Deribit shows that most of the outstanding contracts for BTC are almost evenly split between calls and puts. This means “option traders don't have a clear opinion about where the price will go in the short term,” wrote David Lawant, head of research at FalconX. 

Crypto market participants are expecting BTC to move higher to about $32,000 in the short term. However, if the crypto asset cannot reach this level, it will be harder for Bitcoin to break past that barrier, and then we could see $25,000 in the bearish future. A drop below that will have Bitcoin not finding support until about $17,000.

Ethereum Gains Center Stage

Meanwhile, Ether (ETH) outperformed Bitcoin, surging to as high as $1,685 as investor hopes rose for a potential US regulatory greenlight for a futures-based exchange-traded fund (ETF) while postponing a decision on Spot Bitcoin ETFs from Blackrock, Bitwise, Invesco, and Valkyrie. 

A quick approval for an ETF could see demand for Ether from traditional finance players. As a result, prices jumped following a 43.30% increase in the crypto asset's trading volume from a day ago. This price bump ended up liquidating 24,204 traders for $80.43 million in the past 24 hours, as per Coinglass. Out of this, just over $20 mln were recorded in liquidations for traders of Ether futures, with $17.66 mln of them belonging to those who were short.

In a post on X (formerly Twitter), Bloomberg analyst Eric Balchunas said that the SEC has reportedly asked ETF filers to update their applications to be approved and start trading next week. All these decisions made by the agency this week have been due to the looming government shutdown, which SEC Chair Gary Gensler said would cut down their staff by 90%.

Among the 15 Ethereum futures ETFs from nine issuers—Valkyrie, VanEck, ProShares, Grayscale, Volatility Shares, Bitwise, Direxion, and Roundhill—currently awaiting approval, one is the VanEck Ethereum Strategy ETF (EFUT).

VanEck, a firm managing $77.8 billion in assets, revealed its plans on Thursday to introduce this new Ether futures ETF. EFUT is designed to invest in standardized, cash-settled ETH futures contracts, trading on commodity exchanges that are registered with the CFTC, and it will be listed on CBOE.

Additionally, asset manager Valkyrie started buying Ether futures contracts after getting approval to convert its existing Bitcoin Futures ETF (BTF) to a two-for-one investment vehicle, becoming the first US ETF to provide exposure to both BTC and ETH futures contracts under one wrapper.

Amidst this, the security regulator extended the review period for BlackRock, Valkyrie, and Bitwise's spot Bitcoin ETF applications after delaying the decision on the ARK 21Shares Ethereum ETF and the VanEck Ethereum ETF earlier this week, until the end of 2023. 

The crypto market is hopeful for eventual approval of Spot Bitcoin ETF, especially after the entry of BlackRock, a firm with $98 billion asset under management, whose CEO, Larry Fink, once called Bitcoin a Ponzi scheme but has since changed his stance and now consider it a competitor to fiat currencies. 

“If you look at the value of the US dollar, how much it depreciated over the last two months, and how much it appreciated over the last five years… An international crypto product can really transcend that,” said Fink.

Besides all this, another positive news for ETH came in the form of Ethereum developers getting successful in their second attempt to launch the Holesky test network after an attempt earlier this month failed. The new testnet is to help developers test scaling plans for the main Ethereum blockchain, replacing the Goerli testnet that is currently in wide use. It will allow twice as many validators to join the network compared to the mainnet. Holesky will also be important for Ethereum's upcoming hard fork, Dencun, where proto-danksharding to reduce gas fees is supposed to go live.

Click here to learn all about investing in Ethereum (ETH).

COMP's Volatile 2023 

As the crypto market went green, so did decentralized finance (DeFi) tokens with COMP and MKR, the governance tokens of top DeFi lending platforms Compound and Maker, particularly enjoying decent gains.

The $325 million market cap token was trading around $38.80 earlier in the week, and on Friday, it climbed to the level last seen in mid-August at about $49.5, representing an increase of 27.5%. As of writing, COMP is trading at $47.26, still up 5.4% in the past 24 hours, while managing $176 mln in volume, up 186% from one day ago. 

The breakout of 50-day and 200-day EMA indicates a strong uptrend in the short term. On the upside, the price has resistance present at $50.5 and $55.3, while on the downside, the support level is available at $36.06 and $31.5.

This spike in price was accompanied by a huge spike in the Open Interest. It surged 49% to $56.79 million, suggesting the influx of new money.

The token first came onto the open market in June 2020, when it was worth about $78, and shortly after, it went on to exceed $300 before dropping down again. Then, during the bull market of 2021, COMP prices hit an ATH of $910.54, but since then, it has lost 94.77% of its value. 

After the downturn of 2022 in tandem with the broad crypto market, 2023 has been a volatile one for COMP. The token initially rallied, reaching $59.78 towards the end of February, only to fall to its all-time low of $25.74 on June 10. This price drop came after the collapse of a few crypto banks and the SEC lawsuit. The subsequent recovery saw COMP hitting its 2023 high at almost $85 in mid-July after the reports of a whale buying half a million COMP tokens. 

This followed another downturn, and on Sept. 11, COMP price was yet again down at $35. Since then, the crypto asset has been making attempts at recovery. The token is currently up 10% in the past 30 days, 85% from its all-time low, and 57% in 2023 so far.

COMP is the native token of the lending protocol Compound, which aims to make borrowing crypto easier. Founded in 2017 by Robert Leshner and Geoffrey Hayes, the way Compound works is you put your crypto on the platform and, in return, get cTokens. These tokens can be used as collateral in other liquidity pools and exchanged for other digital assets. Meanwhile, as a governance token, COMP token holders can vote on changes to the platform.

Click here to learn all about investing in Compound (COMP).

Latest at Compound

This week, Compound Protocol awarded GreenYield a $5,000 bounty for the best integration of Compound III at ETHGlobal NY, as per its Compound Grants program, which issues grants to builders in the Compound protocol's community. 

A couple of weeks ago, the algorithmic, autonomous interest rate protocol built for developers working on unlocking a universe of open financial applications announced that to meet the growing demand for liquidity, Compound Treasury has launched borrowing for institutions, including fintech, crypto companies, and banks.

Last year, Compound Treasury introduced a Compound protocol-powered institutional cash management solution. The same year, in May, the Treasury received a B- credit rating from S&P Global Ratings, making it the first institutional DeFi offering to be rated by a major credit rating agency and introducing the highest level of transparency and accountability in the industry. At the time, the crypto project said this move signaled tremendous progress in the crypto industry's maturity.

Offered by Compound Prime, a subsidiary of Compound Labs, Compound Treasury is a crypto-powered cash management solution designed for institutions where accredited investors can earn 4% on USD and USDC with daily liquidity. The protocol defines this as the easiest way for institutions to access the benefits of DeFi.

Now, starting this month, institutions can also borrow from Compound Treasury, using digital assets as collateral. As per this, accredited institutions can borrow USD or USDC with fixed rates starting at 6% APR, using BTC, ETH, and supported ERC-20 assets as collateral on the platform. This comes as institutions face challenges in interacting directly with DeFi protocols to manage their balance sheet. Recent market volatility has also reduced available liquidity and trustworthy options for borrowers while “demand for liquidity remains robust.”

Borrowing on Compound is offered with an open-ended term and no repayment schedule, allowing its institutional clients to draw liquidity and repay balances as they see fit, but only if they remain overcollateralized.

“Compound Treasury can now address the demand for liquidity with a simple, reliable borrowing solution while continuing to provide the same trusted service we've delivered to clients earning interest over the past year,” said Reid Cuming, VP of Compound Treasury, “Introducing borrowing expands our cash management product to meet more needs of our clients.”

In its announcement, the protocol noted that the liquidity is provided by Compound Treasury clients and the Compound Protocol, which has over $3 billion in assets and over $285 billion in total transaction volume since inception, and that collateral never leaves Compound Treasury's control.

According to DeFi Llama, Compound Treasury currently has $111.44 mln in assets, up from $86.33 on Sept. 12 but down from $179.56 mln in July.

If we take a look at other metrics, over the past 30 days, the platform's revenue, which is the share of interest that goes to the protocol, recorded a 2.94% increase to $447.65K while annualized revenue dropped by 0.94% to $5.45 million, as per Token Terminal. Meanwhile, fees, which are the total interest paid by borrowers, have fallen dramatically. A 24.78% decline has been recorded in fees in the past 30 days to $3.17 mln, while annulled fees slumped by 16% to $38.53 mln.

Just last month, on Aug. 15, Compound went live on Coinbase's layer 2 network Base, which became available for the public the same month. A couple of weeks later, the protocol announced that it launched the second market on Base.

Most recently, the native USDC market on Arbitrum went live on Compound, allowing users to transfer native USDC from the Arbitrum market to different chains via Circle Cross-Chain Transfer Protocol (CCTP) without bridging back to Ethereum.

Click here to learn all about buying Compound (COMP).

Concluding Thought

Currently, the accelerated launch of Ethereum Futures ETF next week is helping the market trade in the green. However, the broad market sentiments remain weary and risk-averse given the macroeconomic factors, viz. rising inflation and interest rates, which continue to rule the markets.