Compound Labs came onto the decentralized finance (Defi) scene in 2017. This was a big year for cryptocurrency newcomers and long term investors. Compound formed itself into a money market, using the Ethereum blockchain and expanding the options available for investment in the Defi sector.
Compound has drawn in investors, making a name for itself by providing interest to users, at a better rate than many banks currently offer. The Compound system houses the native coin COMP, which is a separate avenue for investment and a key part of the Compound operation.
Like much of the Defi sector, Compound Labs looked to tackle the problems that are a part of centralized, traditional banking. As consumers became tired of the high bank fees, low interest rates and frequent corruption scandals, the Defi sector was evolving to take its place.
In 2017 the Defi sector was seeing a huge amount of profitable investment and amazing returns for those who entered the cryptocurrency market in its very early days. This boosted the chain of investors constantly looking to see what the next best cryptocurrency to invest in will be. For many, Compound has proven itself a good investment so far.
Newcomers to the crypto market are wanting to know if Compound is still a good investment in 2021. As the cryptocurrency markets have been extremely volatile it is important to pay attention to a variety of factors before choosing to invest in a new cryptocurrency.
Compound has the added benefit of being a source of interest as well as a cryptocurrency, which gives an extra avenue for profit for potential new investors in 2021.
The Compound Mission
The focus of the Compound Labs company can be summed up by their mission statement:
‘The legacy financial system is slow, inefficient, and constrained by intermediaries. We’re on a mission to change that.’
- Compound Labs Inc.
Compound Labs have analysed the problems that were at the forefront of the traditional global banking system as it is now and has identified the areas that need improvement.
Global transactions are becoming a daily necessity but the fees and delays are holding back the lightning-fast world of business and market trading. Many of the fees and delays come from the people needed to work the current system, their salaries and mistakes.
The Defi sector puts automation and global distribution at the core of their operations. This is why investors are moving to Compound to save their money, earn interest and invest in cryptocurrency.
Fixing the Central Problem
Financial expert Salil Deshpande, Managing Director of Bain Capital Ventures, summed the issue up in his article, When Central Bankers Make Mistakes. Deshpande had the following to say:
‘When central bankers make mistakes, they gradually ruin currencies, economies, and countries.’
- Salil Deshpande, Managing Director of Bain Capital Ventures.
Deshpande goes on to explain the growing need for Defi options to replace our traditional banking systems:
‘Non-fiat stores of value, such as gold, have always played a role in economies. When you buy gold, you are expressing a lack of confidence in your central bank...Cryptocurrencies vie to play this role, in the same way that gold does. And Bitcoin is succeeding in being a better gold.’
- Salil Deshpande, Managing Director of Bain Capital Ventures.
Compound is filling this same gap in the market, but with an added bonus of behaving like a savings account. The interest users are accustomed to with their old banks is provided at a higher rate than most bank accounts currently offer. This has gained a lot of interest from users and investors looking to profit from the evolution of the Defi sector.
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Compound’s Core Function
Compound Labs as a company has set out to develop open-source software, which the Defi sector relies on. They make products, tools and services which the Defi world needs to function and which allow decentralized applications (Dapps) to run.
Compound uses an interest rate protocol that works separately from the need for centralized interference. The protocol uses algorithms that allow for total anonymity while users access Dapps, complete monetary transactions and store their money as COMP coins.
Compound only needs users to open an Ethereum wallet. This is an extremely popular choice across the crypto market, with the majority of successful coins using the Ethereum blockchain. The Ethereum blockchain acts as a base for Compound to build on and it then acts as a decentralized money lending system.
Compound uses the ERC-20 tokens which are widely chosen by altcoins and the protocol marks them as COMP. Other tokens can also be converted to Compound coins as the system then marks them as part of their pool of staked coins.
The automated movements of the Compound protocol are controlled by smart contract functionality. This is also extremely fast and efficient. Also, as well as exchanging and transferring cryptocurrency, the smart contracts keep track of ownership and storage for all users.
Because the Compound Labs system has been built to be completely permissionless there is no worry of accounts being rejected, censored or controlled by government bodies. This makes Compound a very interesting candidate for new investment.
Trading COMP to USD
Compound had seen some resistance in its early days and was experiencing some periods of sideways trading throughout 2020. This prevented the cryptocurrency from maintaining a stable price above $200.
The 2020 covid-19 market crash cast a shadow over the global financial marketplace, which accounts for some of the poor performance. However, as the post-covid crypto-boom began more people decided to put their trust in Defi. The crypto sector was recovering from the 2020 crash more quickly than the stock market and this can be seen as COMP begins its upward trajectory in November 2020.
In January 2021 COMP was experiencing the bull market which was working its way across the cryptocurrency sector. COMP experienced a double peak, achieving a high of $537 in February 2021 and an all-time high of $911 by the second week of May 2021. This was a huge price surge and provided exceptional returns for those who invested in COMP before the start of 2021.
However, the 2021 May bear market hit COMP hard, bringing the trading price down to nearly a third of its peak. This took the price of COMP to $343. However, the price did not drop as harshly throughout June as has elsewhere in the market. The price is currently at $318, which is a promising performance during this bearish trading period.
Will Compound Rebound from the Last Correction?
Across the Defi sector, May has been the end of the bull run experienced in the cryptocurrency market during the first half of 2021. The correction that followed the COMP all-time high of $911 was harsh. Investors were disappointed as the price dropped by 623% over the two weeks following the peak.
The bear market has continued to keep the trajectory pointing down and COMP prices continue to lower. However, the movements following the correction have not been as drastic as the market has seen for some of the cryptocurrencies with larger market capitalization.
Compound has shown an ability to resist the bearish trading cycles to some degree and has only fallen by a further $36 over the last month. These figures, taken at the time of writing, show smaller losses than investors had expected, which is a good sign for the coin’s recovery in the near future.
The bear market may continue to hold prices down but COMP should recover quickly under more bullish trading conditions. COMP is also unlikely to fall much further during the next quarter.
Predictions for Compound in 2021 and the Future
COMP has outperformed expectations given the current bear market. This is a good signal for the recovery of the previous highs seen. Towards the end of 2021 Compound is more likely to recover its losses than the average larger cryptocurrency, many of which are still trading downwards substantially.
Compound is also predicted to perform well in 2022, surpassing its recent highs and aiming to hit the $1000 mark by mid-2022. The following correction will likely bring this down however the trajectory should continue upward from the next surge.
Further expansion of the Compound Labs company supports the positive estimates. The company has just announced their new Compound treasury. This is designed to allow neobanks and fintech companies to exchange USD into the stable coin USDC and complete transfers.
This also allows the storage of USDC on the Compound system to achieve interest rates of 4%. This is excellent news for investors looking to achieve long term growth. These rates are not available through the central banking system currently. Most centralized savings accounts offer minimal interest so this is a huge market for Compound to corner, signalling big things for this company for 2022 and 2023.
Compound CEO Robert Leshner has commented on these new profitable avenues and high interest rates saying:
‘It’s the ability to offer a new financial product that fintechs have been clamoring for.’
- Robert Leshner, CEO of Compound Labs Inc.
Compound Labs also issued the following statement for those looking to invest in the new interest-earning process. They are offering:
‘large holders of U.S. Dollars to access the interest rates available in the USDC market of the Compound protocol, while abstracting away protocol-related complexity including private key management, crypto-to-fiat conversion, and interest rate volatility.’
- Compound Labs Inc.
This is giving COMP the boost it needs to rebound and regain its footing once the bearish trading period passes. Once the market recovers, COMP is likely to make huge strides in the next year and a half. This makes COMP a key cryptocurrency to think about adding to your portfolio in 2021 to earn rewards later on.
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Compound Trading Forecast for 2021
COMP is still proving popular as investors are continuing to buy COMP during the bear market. As the price is a long way off the all-time high achieved in May 2021 when COMP crossed the $900 line, new investors are aiming to capitalize on the low price of entry to the crypto market.
Expert analysts are predicting that COMP will return to this high point before the end of 2021. The most conservative estimate is predicting a slow recovery, with the current price of $319 rising to $350 by the end of 2021.
However, there are considerable numbers of technical analysts who feel that the signals point to another bull run for COMP in late 2021. Many are expecting COMP to hit the $1000 mark before the end of the year. This may drop during the correction that will likely take us into 2022, but the overall trajectory is positive for 2021.
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Who is behind Compound?
Compound Labs Inc. was started in 2017 by the current CEO Robert Leshner. Leshner was formerly an economist and previously founded two other software companies. He is a Chartered Financial Analyst and a supporter of the Defi movement.
Compound Labs Inc. has a team of engineers and analysts which form its core company which is based in the US.
What is Compound?
Compound is an open-source protocol that uses algorithmic software to create smart contracts in an automated way. This allows for decentralized lending, transferring and exchanging of cryptocurrency, without slow and costly intermediaries.
This is making it a popular choice in the Defi sector. The system uses the Ethereum blockchain and the ERC-20 tokens on this system. It then converts these into COMP, which is the native coin of Compound, which can be traded as a cryptocurrency in its own right and bought as an investment.
How does Compound compare to the market?
Compound is currently ranked 54th in the terms of market capitalization. It has a lower market cap than many similar competitors, sitting at $1.7B.
However, the overall position in the market is very different as Compound is one of the top protocols used on the Ethereum blockchain to use Dapp and exchange cryptocurrency. This makes Compound a key player in the Defi industry and explains its ability to outperform most of its high ranking competitors in terms of coin value.
Should I invest in Compound in 2021?
Compound is being indicated to be a good investment for 2021. COMP has performed well under the pressure of the bear market that is being experienced by the crypto sector as a whole.
The company Compound Labs is also making huge strides going forward which are supporting industry backing for this cryptocurrency going forward. This is a clear signal to investors that COMP is worth looking to for investment in 2021. For those who are looking to capitalize on the higher percentage returns during the next bull run, it is the right time to buy in at this lower coin price.
Is Compound still going to go up?
COMP is predicted to rise during the remainder of 2021 as it has not suffered the harsh losses that other coins have seen during June 2021. There should be a price increase over the second half of 2021. However, experts are split between predictions of a small short term gain and those predicting a surge before the end of 2021.
What will COMP prices rise to in 2021?
COMP has been predicted to rise from its current price of $319 at the time of writing. Although a few experts are unsure if the coin with achieving more than $350 by the end of 2021, many are more optimistic.
There are several key crypto market experts who are favouring the prediction that COMP will hit $1000 by the end of 2021.