Compound Finance’s native token COMP was one of the biggest winners in the decentralized finance space on Wednesday.
The fourth largest DeFi token by market capitalization rose more than 10 percent, reaching an intraday high of $ 154.08 as traders assessed a wave of upward fundamentals surrounding it. A pseudonymous analyst noted that the Compound Protocol lured traders with competitive annual percentage returns on its stakeout platform. As a result, its liquidity pool was able to attract approximately $ 820 million in tokens in just five hours.
“Wonder if the desire for the blue chip with the highest APY when deployed in a pool of a protocol that accumulated ~ 820 million TVL in 5 hours is a reasonable strategy,” said the analyst tweetedfollowed by the word ‘COMP’.
The total value locked into the composite smart contracts exceeded $ 2 billion after capital inflows. It corrected lower on Wednesday, but traders largely ignored the downward move.
Compound Total Value Locked sustains above $2 billion. Source: DeFi Pulse
That may have to do with the Compound’s whitepaper released last week, in which it shared the details of its new blockchain: the Compound Chain. The paper projected it as a protocol-independent ledger that would store and transfer crypto assets between multiple blockchains.
A break from Ethereum
Compound is currently using Ethereum as the main blockchain. Therefore, the lending protocol cannot support non-Ethereum assets. Compound Chain aims to fill the shortcomings, allowing the protocol to allow direct liquidity through peer chains. They contain ETH 2.0, Polkadot, Solana, Quorum, Celo, and many others.
It is designed to complement the Ethereum contracts audited by $ COMP governance, and extend the DeFi network effects.
– Compound Labs (@compoundfinance) December 17, 2020
The Compound Chain will also introduce a native stablecoin CASH to pay for block validators. COMP will continue to serve as a governance token, giving its holders the right to propose and vote in favor of changes to the Compound core protocol.
The feature is expected to be released in the first quarter of 2021.
However, COMP is at risk
COMP’s latest price rally, meanwhile, came with its own set of bearish forecasts. Technically, December’s upward trend pulled what analysts are calling an ‘Ascending Broadening Wedge’.
The pattern arises when an asset develops in an area between two diverging trend lines, with the top one acting as resistance and the bottom one acting as support. COMP has fluctuated within a similar structure since early November, as shown in the chart below.
The Compound token is eyeing a bearish reversal. Source: COMPUSD on TradingView.com
According to a study by Central Charts, the assets are down 79 times out of 100 by Ascending Broadening Wedges. Meanwhile, there is a 40 percent chance that the price for a pullback will move towards the upper trend line. That roughly puts COMP on its way to a valuation of $ 200.
A breakdown under the wedge can bring the price down to $ 81.