DeFi Based Cryptocurrency, COMP, Jumps 100%. Organic Rise or Coinbase Effect?

COMPOUND governance token [COMP] is the DeFi token backing the Compound borrowing and lending market, like MakerDAO. Compound’s token, COMP, began being distributed to the community with governance protocols on Monday; since then, the token has seen a massive jump in the price.

The total value locked in Ethereum and DAI in the DeFi has jumped by 81% ($57.3 million) and 200% (total $11.6 million).

The release of the COMP token essentially implements decentralized governance based on incentives, taking control from the company to the public. During the initial period, some COMP was distributed among the company’s stakeholders, which includes Coinbase.

The public distribution began on 15th June when the price of the token was around $60. The price of COMP at 14: 33 hours on 18th June 2020 is $124.

Coinbase Effect

Today Coinbase Pro announced the listing of the token on its Coinbase Pro platform. The listing has come has a pleasant surprise for COMP token holders.

The euphoria in the prise post the Coinbase listing announcement has been tremendous. The price surged over to a peak rise of 136% in the hour following the announcement.

comp usd poloniex
COMP/USD 1-Hour Chart on Poloniex (TradingView)

Organic Growth or Euphoria?

With the increase in the value locked in the DeFi, the growth seems organic at the moment. Nevertheless, the surge has now doubled the market capitalization of Compound vs. DeFi.

defi market capitalization
Total Market Capitalization of DeFi Projects (Source)

The total value locked in Maker’s DeFi ecosystem is $492 million, while that on Compound after the 200% surge is $281 million. Hence, the total market capitalization of compound seems exaggerated at the moment.

Moreover, due to the recent launch, currently, a market for shorting the coin has not been introduced. This leaves little room for bulls to act on the short side liquidity pushing prices higher. Hence, when the buying reaches of COMP reaches exhaustion, the big hands are expected to dump on the markets. Nonetheless, new adoptions and a further increase in locked value can continue to bullish run.

Do you think there is more upside to COMP token? Please share your views with us.