Compound (COMP): What Next Following 13-Month Downside Spiral

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Though the broad market weakness affected Compound price & growth, decreased demand had a substantial contribution. That’s visible when evaluating the lending protocol’s on-chain statistics. Let us dig deep.

COMP Price Action

COMP extended the downside trend after the ATH in May 2021. The alternative token took a massive hit in April following failed trials to breach and overturn the decline into support. Compound ended up losing 73% from record highs.

For now, the crypto market sees strengthening bearishness, and the Average Directional Index confirms the narrative. That dragged the alternative token towards the oversold territory, recovering from which will involve massive challenges for COMP.

Though Compound has naturally seen recovery difficult, current dynamics remain different due to the absence of investor/holder support.

The Downside Spiral

The lending protocol has encountered gradual plunges in overall deposits versus the amount loaned. The Dapp boasted nearly $19 billion deposited and around $7B loaned to clients in December last year. However, the past six months saw the number declining to $4.6 billion in deposits, whereas outstanding loans stood at -$200M.

The LTV (loan-to-value) ratio, which measures the percentage between outstanding loans and deposits, stood at -4%. Meanwhile, the previous two months contributed to most of this ratio contraction, before which the number hovered at 33%.

Nevertheless, investors quit the asset, and the protocol remains logical. What to expect from individuals who have consistently lost profits since May 2021? Only 3% of COMP addresses recorded losses one year ago. While writing this content, wallets in losses dominate approximately 92% of COMP’s 187K addresses.

Compound’s recovery will likely depend on a possible rebound by the broad market. Especially with the lackluster DApp growth lately. Meanwhile, the crypto space witnessed another slump within the previous 24 hours, and altcoins suffered the most.

The recent slump had many alts hitting new weekly/monthly/yearly lows, following double-digit plunges in most price charts. Such developments have daily liquidations climbing past $500 million.

Meanwhile, multiple rejections had the altcoin oscillating near $30K before the case worsened on Friday, welcoming a freefall. For now, Bitcoin struggles to steady beyond $27K, following a multi-thousand-dollar crash.

Editorial credit: photo_gonzo / shutterstock.com


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