Despite some setbacks in the first half of the year, the DeFi area has accelerated at a decent pace so far. In 2021 alone, the ecosystem recorded a growth rate of more than 20 times.
More emerging protocols like Abracadabra have also been in the spotlight lately, but platforms like Maker, Aave, and Compound still dominate, claiming their place in the top 5 in terms of total banned value.
Maker and Aave have seen fair price increases over the past few months. However, the price of COMP is still unable to break out of the downtrend.
COMP 4-Hour Price Chart | Source: Tradingview
According to data from Messari, COMP price hit an ATH of $ 911.93 in May, but at the time of writing the asset is down 66.42%. By the end of October, COMP was in the process of reaching deeper ground. It finally broke out of its downtrend shortly thereafter and rebounded 25% in early November.
However, Bitcoin’s slump on November 15 pulled most of the market down. The COMP is no exception with a decline of 0.6% daily, 4.1% weekly and at press time at $ 311.
Despite positive market developments like Bitwise Asset Management announcing the launch of the Bitwise Compound Fund, something inside seems to be holding back the network’s growth.
Incentive crisis hampers protocol?
Interestingly, despite the high social volume of COMP, the weighted psychosocial is close to an all-time low. This shows negative social sentiment and has never been a boon to mid-cap or small-cap altcoins.
In addition, development activity has also been declining since mid-October.
The source: Sanbase
One reason for the decline in positive social volume is that the compound protocol is facing an incentive crisis, as recent research by Alex Kroeger shows. The article notes that most compound liquidity miners get little or no economic benefit from the protocol and do not participate in the governance of the protocol.
The report concludes that “in the case of Compound, it is clear that inducing liquidity is a poor way of getting users to be custodians of the protocol.”
However, this can be resolved by setting the accumulated token issuance plan or upgrading the model to “administrative mining”.
Since the miners currently hold almost 20% of Compound’s liquidity, it is likely that liquidity mining will have to be adjusted to Compound. Once that is clarified, this could also help drive COMP prices higher.
There is some hope for this altcoin, however.
As for retail euphoria, COMP appears to be decent in volume even in a period of consolidation. Interestingly, HODLer appears to have disappeared from the COMP market by August. In particular, the return of the owners could help to improve the dynamics of supply.
The source: IntoTheBlock
In fact, HODLer addresses have increased more than 33.54% in the last 30 days. In the short term, however, the road ahead of the COMP price can still be thorny.
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According to AMBCrypto