The cryptocurrency market saw the highest rate of growth throughout 2021. During this period, most coins achieved new all-time highs and many more were introduced in the market. While blue-chip cryptocurrencies like Bitcoin were at the forefront of this growth, the decentralized finance (DeFi) sector made massive contributions and garnered the most attention.
As a result, many DeFi products have been launched, and most of them are now gaining plausible adoption. One of them is Compound, a DeFi protocol that allows its users to lend and borrow a wide variety of cryptocurrencies.
The Protocol has so far seen widespread adoption making it one of the most targeted crypto projects by both investors and traders.
If you are looking to learn more about Compound, we prepared this guide just for you. We will be looking at the Compound price predictions, technical analyses and whether it is a good investment for hodlers and day traders.
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Let’s dive right in.
- What Is Compound?
- Compound in 2021: Everything You Should Know
- Compound Price History
- COMP Price Prediction for 2022-2023
- Compound Price Predictions 2024 – 2025 and Beyond
- The Future of Compound - What Experts are Saying
- Conclusion: Is Compound a Good Investment?
What Is Compound?
Compound is a DeFi project built on the Ethereum platform. The protocol allows cryptocurrency users to either borrow or lend cryptocurrencies by locking assets.
Technically, this is like a traditional money market. However, in the case of Compound, there are no middlemen like banks to regulate the lending and borrowing of tokens. Instead, to be able to effectively perform its functions, Compound relies on smart contracts.
These are basically predefined agreements that are automatically executed when a certain condition is met. For example, a smart contract can be defined so that the tokens are only released to the borrower after they provide collateral, which is usually in the form of other cryptocurrencies or DeFi tokens.
Smart contracts are also crucial when it comes to defining important factors that drive a money market. These include the interest amount that lenders earn when they lock their assets, the general terms and conditions of lending and the repayment schedule.
Compound makes it possible for long term holders to make some passive income from their investments instead of simply storing them in a wallet. When the lender deposits their assets into the protocol’s lending pool, they earn interest on them on top of other incentives.
The incentives come in the form of crypto, known as cToken, which a lender can then trade or transfer to another user. However, if you want to redeem your cToken, you can only exchange it for the cryptocurrency that you had deposited into the pool. For example, if you had locked Bitcoin, you can only exchange the cToken for an equivalent amount of BTC instead of another token like ETH.
Unlike traditional money markets, Compound does not have restrictions on when to withdraw your deposits. If you need to use them, the smart contracts will allow you to withdraw at any time, including the interest you would have made.
On top of the cTokens, Compound users also receive incentives in the form of COMP when they perform actions like withdrawing, borrowing, repaying or lending. COMP is Compound’s native token and is what is mostly used to run operations within the protocol.
Compound In 2021: Everything You Should Know
Like most cryptocurrencies, Compound started 2021 on a rather bullish note. At the beginning of the year, most assets experienced monumental growth and achieved new milestones. Compound was no exception.
In fact, the protocol made some of its biggest price leaps in early 2021 and started attracting some attention and media coverage. For example, between January 26th and February 5th, COMP jumped from $220 to about $534. This is a staggering 142.7% increase within a week.
Apart from the price increase, Compound also saw plausible growth in terms of how it works. There has been the introduction of new features meant to make the protocol an effective and efficient blockchain-based money market.
One of the recent additions is the Gateway testnet which is expected to bring some major changes to the protocol. Gateway is simply a substrate blockchain that is based on the Ethereum platform and is governed by Compound users who hold the COMP token. The blockchain is fully upgradeable when COMP holders vote on code changes, without the need for hard forks or downtime.
Gateway works pretty much the same as the compound protocol with a few improvements. For instance, it has a more robust risk engine that is based on the volatility of both the assets you borrow and those you use as collateral. While this means that you are exposed to higher risks, it consequently results in capital efficiency improvements for assets that are less volatile.
Another good thing with Gateway is that you can earn interest in dollars using CASH, which is simply Gateway’s standard unit of account. There is also no interest charged on the number of tokens you borrow. For instance, if you borrow 500 Bitcoin coins, that is all you will ever owe.
Gateway also allows you to painlessly and inexpensively transfer assets to other users.
According to its creators’ “Gateway will evolve into the backbone of a global interest rate market, capable of supporting any asset - including the wave of currencies, assets, and tokens yet to be created”.
Of course, Compound will see more growth in 2022. As the DeFi keeps blossoming, we expect the protocol and its native token COMP to grow and become much more valuable for its investors.
Compound Price History
As we mentioned in the beginning, the Compound protocol was launched around 2017, when most cryptocurrencies were blossoming in the glory of the first biggest market-wide bull run. However, the COMP token was not introduced to the market until around June 2020.
When it started trading, COMP went for about $60 per token. Compared to other cryptocurrencies, this was a hefty starting point. But there is an explanation for this.
You see, when Compound introduced its native token to the market, it was already gaining some traction. Most investors had seen its potential and believed that it was a great alternative to hodling in cold wallets. So when the COMP token came around, it was quickly slurped up by existing Compound users and new investors, which caused its price to spike.
Within the first four days of trading, the token parabolically rose from $78 to$336, placing it on the radar of more investors and day-traders. However, the leap must have been too high for the new token to maintain.
As a result, the price tumbled down to about $100 and stayed there for the most part of 2020. Towards the end of the year, COMP’s price rejuvenated and closed the year at $157.72 per token.
This was a preparation for the wild uptrend that would come at the start of 2021. So when the early 2021 bull run came knocking, Compound quickly hopped aboard, and its price started on another bullish uptrend.
Within the first few weeks of 2021, COMP was already trading above $250, then quickly doubled to $535 in early February. This growth attracted attention, and soon investors were flocking to be part of the success that Compound was slowly carving out.
In March and April of 2021, there were wild price swings that got many investors holding their breaths. However, in mid-May, the token had another dramatic spike that drove it to its current all-time high of $910.
Although most price analysts expected that the price would be playing above $1,000 by June 2021, the growth was quickly halted when China announced new regulations and a crackdown on cryptocurrency assets.
Most cryptocurrencies dropped, and the now enthusiastic COMP wasn’t spared. Towards the end of May, the price dropped by more than 66% to trade at slightly above $300. In June, the price dropped below $300 later recovered and at the beginning of November was trading at $380, according to data from CoinMarketCap. COMP closed 2021 with a trading price of $200.29.
Check Out: Could Compound Be A Millionaire-Maker Coin?
Compound Price Prediction For 2022-2023
Even the most bearish price analysts believe that Compound will be much more profitable in 2022 and 2023. Although it is difficult to give a good prediction for the next two years, we believe that the token is set for some major growth and technological improvements within this period.
As is expected, the predictions tend to differ more the longer they go. Let’s start with Long Forecast.
The forecast is not very optimistic for the upcoming years. The site has Compound dropping as low as $51 in 2022 to reach only as high as $125 in October 2023.
Wallet Investor presents a similar pessimistic prediction, with Compound dropping each of the following years. The Hungary-based crypto price analyst expects Compound to start 2022 at an average price of $326.25. The price will then start dropping after reaching this mark in early February and end the year with a high price of $27.79.
COMP will then bounce between $26 and $23 from January to October 2023. According to Wallet Investor, the coin's highest price will be $14.69 by the end of 2023.
Digital Coin is much more optimistic than the other two sites. It predicts a closing price of $156.21 for 2022. According to their predictions, Compound will start 2023 with a price of $213.53, go as high as $214.49 in July and then drop to $180.77 in December.
Similarly, CoinPrice Forecast predicts that Compound will end in 2022 at $183 and 2023 at $180.
Compound Price Predictions 2024 – 2025 And Beyond
For 2024 and 2025 Wallet Investor and Long Forecast continue with their bearish predictions.
According to WI, Compound will start 2024 at $14.39, drop to $5.29 by June and rise slightly in December to $5.49. For 2025 the site predicts a price of $5.65 in January, which will briefly rise to a little over $6 but then drop and Compound will trade around the $4 mark for most of the year. The coin will close the year at $2.95.
Long Forecast predicts a price of $106 for January 2024 which will drop during the year but rise in the last quarter and Compound will close December at $140. In 2025 the highest forecasted price for COMP is in February - $147. From there, the price will gradually drop to end the year at $82.
Digital Coin is again more bullish. The ending prices for Compound in 2024 and 2025 are $197.82 and $275.61.
Coin Price Forecast again agrees and projects the prices $227 and $285.
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The Future Of Compound - What Experts Are Saying
The DeFi industry, in general, is poised for a promising feature, with many of the existing projects anticipating mainstream adoption. Billionaire investor Mark Cuban has also made some bullish remarks concerning the future of decentralized finance.
According to the entrepreneur, banks and other financial institutions should be wary of the DeFi industry and decentralized autonomous organizations.
Based on the sentiments of several finance experts, Mark might be right. There is no doubt that DeFi is taking the crypto world by storm, and Compound has emerged as one of the most competitive players.
Reports from the price-tracking website CoinMarketCap show that Compound’s price has already surged more than 500% from year to date with a market dominance of 0.1%. This was after COMP rose from $143.73 on the first of January 2021 to its all-time high of $911 on May 12.
Although the price has had subsequent consolidations, there is a positive outlook concerning its future. As the demand for DeFi rises exponentially. Compound is strategically positioning itself as the better option, especially when it comes to blockchain-driven money markets and the lending industry in general.
So, generally, we expect Compound as a protocol and crypto token to have major growth in the coming years and might be heavily profitable for its investors.
Conclusion: Is Compound A Good Investment?
Compound’s underlying technology has a lot of potential for mainstream adoption, which subsequently makes its native token a good long-term investment. The protocol addresses a pain point that most long-term investors didn’t even know they had.
Usually, people who are looking to hodl their cryptocurrencies merely stash them away in some cold wallet and forget about them. These tokens will not increase and may not even be profitable after several years.
However, when you lock these tokens in Compound’s protocol and allow other users to borrow them, you not only earn interest but also some incentives in the form of Compound’s native token, COMP.
This concept alone makes Compound a really exciting investment because, at the end of the day, your investment will still appreciate in value after you used them to make some passive income instead of just cold-storing.
Apart from the interest, you earn by locking your assets, you can buy and profit from COMP’s rapidly appreciating value. For instance, people who bought COMP when it was still trading below $100 and sold it when it hit the ATH of $911 made a lot of profits.
While we do not expect the price to rise as parabolically again, there is a high probability that it will be insanely high in the next 5 to 10 years.
Most importantly, don’t forget that Compound is still a cryptocurrency that is vulnerable to high levels of volatility. If you decide to go ahead and invest, you will need to tread carefully. Tables can easily turn against your expectations, and you might lose all your investment.
Finally, note that the price predictions in this guide are only speculative and not final. There is a high probability that the price might not move as predicted, so you should be prepared for anything.
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