Compound’s governance token COMP has been trading for about two weeks, and is now down over 40% from its all-time high close to the $400 mark. Its market cap is still of over $500 million.
According to CryptoCompare data, Compound’s COMP token is currently trading at $220 after dropping from a $385 all-time high seen earlier this month. The price of the token started trading on centralized exchanges at about $130.
In the last 24-hour period, the token has lost over 6% of its value, as those who are receiving it are likely selling it on the market right away.
As CryptoGlobe reported, the COMP token was launched this month. It’s a governance token, which means that token holders have a right to vote on important decisions affecting the Compound protocol, ranging from technical upgrades to decisions on adding new cryptoassets.
Compound is a decentralized finance (DeFi) protocol l launched in 2017 by Robert Leshner and Geoff Hayes. It lets users borrow and lend cryptocurrencies in peer-to-peer transactions. Those who borrow need collateral to do so and must repay the funds with interest, while those who lend receive interest on their holdings.
The COMP token is distributed to Compound users who interact with the protocol, creating an incentive for users to both borrow and lend cryptoassets on it. This saw the rise of yield farming, where users borrow and lend as much as possible to “farm” COMP tokens. This led to a significant rise in the total value of assets locked on Compound, which surpassed $1 billion this week.
Despite the milestone, various analysts believe COMP tokens are overvalued while they are above the $200 mark. Multicoin Capital’s Tony Sheng, for example, has warned that even Compound’s own team believes the tokens are overvalued, arguing in a blog post that the way COMP tokens are being distributed is leading to added selling pressure.
Sheng further pointed out that 46% of all COMP tokens are held by Compound’s team. He added:
Just as investors lost their shirts buying into the outlandish promises of the ICO era, so too will investors in the DeFi era lose their shirts under-appreciating the risks of illiquid markets and corruptible oracles.
Since it was launched, the COMP token has been listed on numerous cryptoassets exchanges, the latest one being OKEx. This is adding liquidity to the cryptocurrency and making it easier for those who receive tokens interacting with the protocol to dump them on the market.
OKEx has added spot trading pairs for COMP against Tether’s USDt stablecoin and against BTC. The listing comes months after it expanded its derivatives portfolio with ETH/USD options, with plans of adding EOS/USD options being announced as well.
Featured image via Pixabay.