A compound is a platform to borrow and lend crypto assets without a central authority. The lenders are like investors who want to generate more value, but borrowers pay interest on the amount. The crypto assets enter into a liquidity pool where a series of smart contracts match the available loans and complete the process on this decentralized network.
Smart contracts play a vital role in determining interest rates using algorithms that monitor the crypto network. In order to borrow an amount, you have to add a particular amount of coin to the threshold. The compound work in the altcoins like ETH, USDT, USDC, REP, BAT, DAI, WBTC, and ZRX. The best part is that many investors see it as a traditional financial instrument. Unlike a bank, it does not need risk checks, sustainability, and identity verification. There is no lower limit on lending and borrowing crypto assets.
There are no terms and penalties, the users can pay back at any time or withdraw it, but the interest rates will depend on time. Here, the interesting thing is that the users must make sure that the collateral value does not go below the threshold. Otherwise, it will be liquidated, and collateral will be sold to pay the loan amount.
However, the Compound network is not a time-tested solution, and it needs to be popular all over the world to maintain liquidity for the long term. So it has the potential, but whether or not it will sustain in the long term depends on the market adaption.
At the time of writing this post, COMP was trading around $61. It is consolidating just below the resistance of $65. Overall, the Compound coin is bullish because it has formed a higher low in the short term. $28 and $45 are the short-term support of this coin.
Most technical indicators are bullish; candlesticks are forming in the upper range of the Bollinger Bands. We think it will break the resistance within a few weeks, and that will be a good time to invest in the short term. But before that, click here to read a detailed prediction on the future performance of COMP.
Though candlesticks are bullish in the long-term, the Compound has formed higher lows. We can consider it bullish, but it must break the resistance this time. Otherwise, COMP may fall to the level of $45 again. Candlesticks are in the upper range of the Bollinger Band (BB), and other popular technical indicators like MACD and RSI are bullish.
If COMP breaks the resistance, we can consider it long-term bullish, but if it breaks the support, it may hit the $20 level. So, you should keep a closer eye on the price and take a position as soon as it breaks the resistance decisively.