Cryptocurrency rates are dropping throughout the board, but Compound’s COMP coin seems to be rising due to a jump in the DeFi sector’s growth. As DeFi TVL increases to $14.4 billion, the Compound- COMP token beats the MARKET UPDATE. Whereas the entire crypto market has experienced a slump, the value of COMP, the governance token of the decentralized finance-DeFi company Compound, has been skyrocketing.
Despite the continuing bear market in cryptocurrencies, the token has gained 56 percent in the last week. The abrupt rise in COMP could be due to several factors. The unique market behavior on futures exchanges, in which the token’s financing rates stayed firmly negative, has been identified by traders.
Whenever sellers vigorously short an asset in the futures market, its funding value falls. However, when the asset’s price rises in tandem with a negative funding rate, a short pressure occurs. A sharp pressure throughout key futures exchanges is likely to have fueled COMP’s latest surge. This means that although the futures market was betting against the token, spot market dealers were busily acquiring it.
This pattern shows that some investors are soon betting on a strategic alliance or a substantial network improvement. Or else, it would appear strange for the futures market to be actively shorting COMP when the spot market is buying the token.
There Are Still No High-Profile Partnerships with Compound Yet
According to a pseudonymous trader, the negative financing cost of COMP prompted shorts to repay longs 0.021% of their holdings per hour. For instance, if a trader used to have a $100,000 long position on COMP, the funding cost would’ve been $21 each hour at a certain pace. On $COMP, financing is incredibly bad. Each hour, shorts compensate longs 0.021%. The Compound hasn’t revealed any high-profile partnerships to now. However, its creator, Robert Leshner, lately applauded a proposal from a developer named Gauntlet, describing it as a substantial upgrade to the protocol.
Gauntlet’s idea aims to accomplish three goals. To begin, it eliminates unneeded code from the Comptroller, which would be the risk mitigation layer of the Compound protocol. It also includes a Grant functionality, enabling the Compound governance community to request grants via COMP. The proposal’s final section introduces a Contributor function, allowing governance to send COMP to other destinations.
In response to Gauntlet’s suggestion, Leshner stated that it is thrilling and essential for Compound. The proposal is intriguing for two reasons. The chart on the upward trend is a substantial improvement over Compound Banknote to yen symbol. The designer will obtain 1000 $COM for their work on this and future suggestions. He stated that expanding the protocol is much more satisfying than ever before. It’s unusual for a community request to create a considerable price surge in a significant DeFi token in just a few days.
What’s the Deal with the Rally?
According to the market trend, Comp rallied in a brief duration of time due to a combination of three causes. In recent days, several traders in the futures market seemed to have shorted COMP. This triggered a short squeeze, which drove the value of COMP higher.
The overall worth locked in DeFi has also risen to $14 billion. Also, Compound is the third-largest DeFi protocol, the general expansion of the industry may have boosted COMP. Traders may also anticipate an update or a network overhaul shortly, even though there are no indications of one at the moment.
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