How to Invest in Compound 2021

Last Updated July 23rd 2021
20 Min Read

Compound is a pioneer of the decentralized finance industry. As a savings and borrowing application, it differentiates itself from other DeFi platforms by paying yields on its own highly rated COMP token. 

Considering the rising popularity of this protocol, one of the trending questions in the crypto market at the moment is 'How to Invest in Compound?'

In this comprehensive guide, we explain all you need to know on how you can start investing in Compound and what you need to know beforehand. 

Contents:

How to Invest in Compound in 5 Easy Steps

If you want to buy Compound easily and quickly, it is best to use a regulated online broker that gives you access to this digital asset at 0% commission - such as eToro. 

In fact, the entire process of investing in Compound can be completed within a few minutes at this top-rated broker. 

All you need to do is follow these five simple steps:

  • Step 1: Create your investment account on the eToro platform. 
  • Step 2: Add funds to your account. 
  • Step 3: Find Compound from the list of supported financial assets. 
  • Step 4: Specify the amount of money you want to invest in Compound and confirm the order.  
  • Step 5: Store your Compound tokens within the eToro web wallet for free. 

As easy as this sounds, the real work with investing in Compound lies in learning about this digital asset and the underlying crypto market. 

Let us get started with what you need to know when you know when considering how to invest in Compound.

Invest in compound

How Does the Invest in Compound Process Work?

If you have previously traded any other financial asset, you might already be knowledgeable about how investing works. Basically - you buy Compound, hoping that the price of this digital token will go up in the future. 

Once Compound appreciates in value, you will sell your investment at a profit. 

That said, the crypto market is primarily volatile in its nature. As such, when investing in Compound, you need to perfectly understand the risks involved. Especially for a newcomer, it is crucial to know what factors can influence the price of your Compound investment. 

As a cryptocurrency, the value of Compound keeps fluctuating all the time. This is driven by the supply and demand in the market. For instance, if more investors are buying Compound, then it will lead to a surge in the price of the coin. 

Contrarily, if the market has more sellers than buyers, then the value of the token will go down. 

Here is an example that can explain this better: 

  • Suppose that you want to invest an amount of $2,000 in Compound. 
  • When investing, the price of Compound is $300.
  • After completing the purchase of Compound tokens, you decide to continue storing them in your wallet. 
  • After three years, the price of Compound has increased to $550. 
  • This converts to a gain of over 83% in the value of the coin. 
  • On your $2,000 investment - your profits would be $1,660. 

As the example demonstrates, you will be holding on to your Compound coins until the market reveals an opportunity for you to make a profit from your investment. 

However, if you are a beginner investor - you will have to prepare yourself to ignore the short-term volatility of Compound and focus on the long-term prospects. 

Why Should you Invest in Compound?

There is no investment strategy that works for everyone. Whether you want to invest your money in Compound or not will be ultimately decided by your financial goals and risk propensity. 

That said, if you are on the fence about investing in Compound, here are some factors that will help you make an informed decision. 

Read Also: Pros and Cons of Investing in Compound

Compound has a Working Business Model 

One of the main concerns surrounding many emerging cryptocurrencies is the lack of real utility. With Compound, the case is far from it. 

As an open lending environment, Compound presents itself as a decentralized platform for crypto borrowers. Its notable distinction is that it provides access to financing without having to go through any credit checks. 

The protocol minimizes the risk involved by over-collateralization. Meaning, if one has to borrow an amount, they will have to provide crypto assets worth more than the value of the loan. This makes this platform more feasible, flexible, and a prudent option for crypto lenders. 

In addition, your collateral will also be earning interest. Overall, Compound comes across as a better alternative to the traditional banking system and centralized crypto-lending platforms currently available in the market. 

As the governance token of Compound protocol, COMP coins also stand to increase in value with the rise in popularity of the lending platform. 

DeFi Industry is Booming 

The DeFi industry was one of the fastest-growing crypto categories in 2020. And Compound is one of the pioneers of this movement. It has built a solid reputation in the DeFi space and was the first project to devise the concept of yield farming. 

The Compound lending platform has continued to grow and record high user numbers. Over a short time, it has earned trust from DeFi and crypto enthusiasts alike. 

If the DeFi space expands, Compound is likely to gain more popularity, and this will be reflected in the price of its COMP tokens. This makes COMP a good choice to buy and hold for the long term. 

Compound has an Expert Team 

No matter which asset you want to invest in, you should perform your own fundamental analysis. In the case of stocks, investors generally analyze the company and its financial standing. 

The same goes for cryptocurrencies as well. One of the first things investors check is the credibility and experience of the team behind the crypto project. And in the case of Compound, its developers are those who have already established themselves as experts in the digital asset field. 

Compound was founded by Geoffrey Hayes, who had built his expertise while working as a maintainer at Ethereum. He is also involved with other popular crypto projects. Some other notable names in the team include Robert Leshner, Jayson Hobby, and Jared Flatow. 

In short words, Compound has a very strong team behind the project, which can be of high advantage for the successful running of the platform over the long term. 

Compound has a Limited Supply 

Another notable characteristic of Compound is that there is a limited supply of only 10 million COMP tokens. This can play a big part in the long-term appreciation of this coin. 

As investor demand increases, this low supply of Compound can drive its price up higher. Currently, the circulating supply of Compound is just over 5,2 million tokens. 

Therefore, if you are looking to leverage the popularity of this coin, you might stand to make more by investing now than later. The main thing is to make sure that you are kept abreast of the wider cryptocurrency markets. 

Check Out: 10 Reasons Why You Should Invest In Compound (COMP) Today

How to Invest in Compound - Various Options Available

Investing in cryptocurrencies like Compound is getting easier by the day. Today, your options are no longer limited to a handful of questionable platforms. Instead, there are dozens of legitimate Compound providers that can offer you an impressive range of services. 

Your chosen crypto provider can make the process of investing a smooth ride, or a complicated undertaking. With this in mind, below we have the two most commonly used methods to invest in Compound online. 

Compound Exchanges

Cryptocurrency exchanges have become the go-to places for many investors to buy Compound. At first glance, these are completely legitimate - and give you easy access to digital assets. 

However, if you choose this path - there are a few concerns that you should be aware of. The most important of them all is the lack of regulation. This is because the lion's share of cryptocurrency exchanges operates in an unregulated manner. 

That means - there is no financial authority that monitors the actions of these exchanges. Put differently, when you invest in Compound via such platforms - your money will always be at risk. 

Crucially, cryptocurrency exchanges might not offer you the convenience of buying Compound using your fiat money. Your only option might be to exchange another cryptocurrency in order to buy Compound. 

Moreover, you will have to withdraw your Compound tokens to a private wallet, as in-built storage is not likely to be safe. This will also require you to transfer the coins back when you are trying to cash out your investment by exchanging it for another currency. 

Overall, if you are unfamiliar with how cryptocurrency exchanges work, you might find this quite inconvenient.  On the other hand, the easier option will be to consider a regulated online crypto broker for your Compound investment. 

Compound Broker

Cryptocurrency brokers come in all shapes and sizes. There are platforms that offer you only the minimal features that can facilitate cryptocurrency investing. 

And then there are others that provide you with fully-fledged services to make your investments convenient and cost-effective. On such platforms, you will have access to constant market updates, educational resources, and even expert financial advice. 

When thinking of how to invest in Compound safely - your best option is to stick with a regulated crypto broker. This will allow you to make Compound investments, knowing that your funds and assets will be safe under the protection of financial authorities. 

Moreover, choosing a regulated broker will allow you to buy Compound directly with a fiat currency. You will also have the option to fund your investment account with a payment method of your choice - be it a debit card, credit card, an e-wallet, or a traditional wire transfer. 

Most importantly, many brokerage platforms such as eToro help you to save significant trading costs by allowing you to invest in Compound on a commission-free basis. 

Furthermore, on eToro - you will also have the opportunity to store your Compound coins for free and not worry about finding an external wallet for the long-term storage of your digital assets. 

Invest in compound

How to Choose a Platform to Invest in Compound 

By now, you should be clear about why it is best to avail the services of a regulated crypto broker instead of an unregulated cryptocurrency exchange. 

That said, choosing the right broker to invest in Compound is not an easy job. A quick internet search will tell you that there are dozens of brokerage platforms that are competing for your business. 

Therefore, the process can be quite challenging - especially for beginners. Taking this into account, we are listing a number of metrics that you can use to figure out which crypto broker is the best fit for your Compound investment. 

Licensing and Reputation

As we have already established, the regulatory standing of a broker is the one factor that you do not want to compromise on. If a crypto broker that appears to be appealing does not hold a license from a respected financial authority, you should always look elsewhere. 

With this in mind, let us offer you some insight into what financial regulation means when investing in Compound. In the trading space, the main aim of these governing bodies is to ensure the protection of consumers' investments, prevent fraud and limit the risks. 

There are a few reasons why regulation is an advantage for you. A licensed brokerage platform is required to follow the guidelines set by the respective financial authority. 

This includes:

  • Storing your funds separate from theirs.
  • Regularly submitting its trading records for audits.
  • Verifying identities of all registered investors and traders.
  • Clearly display the risks involved with investments.

As you can imagine, such safety measures can offer your Compound investment an additional layer of security. 

Some of the most respected financial authorities you will come across in the online crypto space include the FCA in the UK, SEC in the US, ASIC in Australia, and CySEC in Cyprus. 

eToro is an example of a brokerage platform that is regulated by more than one of these financial authorities. 

To sum up, when investing in Compound, the regulatory standing of the broker should be the defining factor for assessing whether a crypto broker is suitable for your investment needs. 

Fees to Invest in Compound 

Apart from the price of Compound itself, all cryptocurrency platforms charge you a fee for executing your investment orders. This is how these financial establishments make a profit on their business. 

The type of fees you pay will be dependent on the crypto broker you choose. 

The majority of them will require you to pay a commission while buying and selling Compound. The specific amount will be denoted as a percentage of the total amount you invest in the digital asset. 

For example, suppose that your chosen broker has a commission rate of 2.99% on all cryptocurrency transactions. This means that you will have to pay this 2.99% fee every time you buy Compound or sell it. 

In practice:

  • If you invest $1,000 in Compound, you will have to pay $29.90 when you buy the digital token. 
  • Then again, let us say that the value of your investment increased to $5,000 at the time of selling. 
  • This will incur a commission of $149.50 when you are cashing out your COMP tokens. 

As is clear, if you are an investor making multiple investments on different cryptocurrencies - the commission you pay can easily add up. 

On the other hand, on eToro - you have access to all cryptocurrency markets on a commission-free basis. No matter how much you invest in Compound, you will not have to pay any money in terms of this particular fee. 

In addition, many brokers also charge a fee to transfer funds to/from the platform. This will also vary depending on the currency and the payment method you choose. 

Minimum Compound Investment and Payments

At the time of writing, on June 11th, 2021 - a single Compound token is worth $319.37. This means that if you want to buy ten COMP coins, your investment has to be a minimum of $3,193.70. 

Understandably, for many investors - this might be a large amount to risk on a single asset, especially if you are a beginner. This is where low 'minimum investment amounts' can be of advantage to you. 

The minimum investment is the smallest amount that you can invest when buying an asset - in this case, Compound. 

Brokerage platforms such as eToro allow you to start investing in Compound from just $25. This will allow you to invest in cryptocurrencies without having to risk large sums. 

And as such, preferably, you need a crypto broker that sets a low amount as the minimum Compound investment. 

Apart from this, you should also explore what payment methods are offered by your chosen broker. Some platforms might require you to make a traditional bank wire transfer - which can be an unnecessary hassle. 

On the other hand, on eToro, you can fund your account using a debit card, credit card, PayPal, Neteller, or Skrill. 

Storage and Cashing Out

When thinking of how to invest in Compound, you should also consider the safe storage of your COMP tokens. Depending on your investment approach, you will be storing these digital coins for years to come. 

Some brokers, such as eToro, give you access to in-built wallet services for your digital assets. If this is the case, you do not have to worry about withdrawing your COMP tokens to an external wallet. 

If not, you will have to do research and find a crypto wallet provider that offers you competent features and top-notch security. However, not to forget - as these will be unregulated, you will have to take the entire responsibility for the safekeeping of your private key as well as your COMP tokens. 

Don't Miss: Is Compound A Good Investment And Should I Invest in COMP?

How to Invest in Compound Today - Step-by-Step Walkthrough

In this last section of our guide, we will give you a run-through of the steps you need to follow to start investing in Compound.

Since eToro comes across as one of the best online brokers - we will be using this platform as an example to show you how easy it is to invest in Compound from the comfort of your home. 

Step 1: Open an Account

Head over to the homepage of eToro and then click on the 'Join Now' button. 

You can create your account by providing your email address and setting a username and password. You’ll also need to input your personal information. 

When done, eToro will ask you a series of questions to assess your experience in the investment field. 

Step 2: Provide Some ID

As we mentioned earlier, as a regulated broker - eToro is required to verify your identity to secure user funds and prevent untoward activities. 

To complete this step, you will have to provide two documents:

  • A government-issued ID or a driving license
  • A recent utility bill, a bank statement, or a tax letter that can serve as your proof of address 

This KYC process is automated, and you will be able to complete it within a few minutes. 

eToro will notify you if your account has been verified or whether you need to provide additional documentation. You can choose to leave this part for later, but you will need to attend to it if you want to deposit more than $2,250. 

Step 3: Make a Deposit

You should now fund your investment account to gain access to Compound. 

eToro accepts a variety of payment methods. Among them, a wire transfer takes the longest to process. If you want to fund your account right away, you can choose to pay using a debit card, a credit card, or through an e-wallet such as PayPal. 

Step 4: Search for Compound

To find the Compound trading page on eToro - simply enter ‘COMP’ on the top search bar. Then, click on the ‘Trade’ button next to COMP. 

Step 5: Complete Compound Investment

On the trading page, you will have to specify whether you want to buy Compound or sell your investment. You should also enter the exact amount you want to invest in Compound. 

When you are finally ready to proceed - click on the 'Open Trade' button. The Compound tokens you purchased will be added to your eToro portfolio right away. 

Step 6: Cash Out Your Compound Investment

As eToro allows you to store your COMP tokens on the platform, the process of selling is also easy. All you need to do is to go to your portfolio, locate COMP and click on the 'Sell' button. 

The proceeds from your investment will be available for withdrawal at your disposal. 

On the other hand, if you have your COMP tokens stored in an external wallet, you will have to transfer the assets to your chosen broker first. 

How to Invest in Compound - The Bottom Line

Compound is undeniably one of the most famous DeFi projects to date. Considering the rising popularity of the sector, the timing is as good as ever for you to invest in this digital asset. 

In terms of which is the easiest and safest way to invest in Compound - consider using a regulated online broker such as eToro, This safe and secure platform provides you access to Compound commission-free and at a minimum investment of just $25. 

eToro – The Best Platform to Buy Compound

eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.

Virtual currencies are highly volatile. Your capital is at risk.

FAQs

How much should I invest in Compound?

Considering the volatile nature of Compound, it is always suggested that you invest a sum of money that you can realistically afford to lose. On eToro, you can invest in this digital asset from just $25. 

Is Compound a good investment in 2021?

Since the time of its launch, Compound has gained over 250% in value. That said, there is no way to know what the future holds for this digital asset. Therefore, it is always best to risk small amounts that you can afford to lose. 

Which is the best wallet to store COMP tokens?

On eToro, you can store your COMP tokens right on the platform under the watchful eyes of various financial authorities. Alternatively, you can also find a secure external storage solution for the safekeeping of your Compound coins.

How can I start investing in Compound?

To invest in Compound - choose a regulated crypto broker such as eToro, create an account with the platform, and add funds. You can then enter how much you want to invest in this asset. The end-to-end process can be completed in a few minutes. 

What is the minimum amount required to start investing in Compound?

The smallest amount required to invest in Compound will depend on your chosen broker. On eToro, you can begin investing in cryptocurrencies from just $25. 

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