What is Compound?
Compound is one of the top emerging decentralized finance (DeFi) protocols. It runs on Ethereum, and it aims to encourage the blockchain network to run a traditional money market.
The Compound protocol was founded in 2017 by Robert Leshner (CEO) and Geoffrey Hayes (CTO), two hight profile employees at Postmates, an online food delivery company. Both remain in executive roles at Compound Labs, Inc, the software development company behind the Compound protocol.
Robert Leshner has been active in growing the blockchain space. He has publicly invested in popular crypto platforms such as Blockfolio, Opyn, and Argent Wallet.
The Compound platform allows users to lend and borrow cryptocurrency without the need for a financial intermediary such as banks or other third parties. Users can find multiple cryptocurrency assets on the platform. Compound allows users to become lenders or borrowers of cryptocurrency. Lenders earn interest on assets they deposit. Borrowers need to deposit collateral for receiving a lend. The maximum loan-to-value (LTV) ratio depends on the collateral asset. Currently, it ranges between 50 and 75%. If the collateral falls below a maintenance threshold, the interest rate paid can vary by loan asset. Borrowers may face liquidation automatically.
Compound issues a new cryptocurrency called the “cToken” (e.g. cETH, cBAT, cDAI) to the lender after a deposit has been made. Every cToken is transferable and can be traded freely. However, it can only redeem the crypto that it was issued for. The exchange rate between these cTokens and the underlying assets increases over time. This means that you can redeem them for more underlying assets than you originally put in. This is how interest is distributed.
The Compound protocol manages the entire lending and borrowing process in an automated way. Lenders are able to withdraw their deposits at any moment.
Compound’s native token is COMP, which is used for governance and to reward users that interact with the protocol, by withdrawing, borrowing, or repaying an asset. COMP is an ERC-20 asset token that runs on the Ethereum Network.
Although complex, the model has been successful in attracting users and encouraging others to adopt it. As of December 2021, according to the DappRadar, almost $10 billion is locked up (TVL) in the Compound protocol.
As crypto exchanges have become more accessible and the COMPUSD price has risen, more people have begun to invest in cryptocurrency. Compound trading is allowing a great transfer of wealth and even new investors can hope to profit from its fast growth and earn higher returns than they would on the stock market.
With so much attention from the media and financial traders, new cryptocurrency investors are always looking for advantageous ways (platforms) to buy Compound (COMP) online. Luckily, there are numerous services and guides on how to buy Compound to help you get started in the cryptocurrency market.
Where to Buy Compound (COMP coin)
There are two ways cryptocurrency investors can choose when searching how to buy Compound (COMP) online:
- Cryptocurrency exchange
- Online Brokers
Crypto exchanges might be a good option for holding your funds, especially if you plan to withdraw them to a private wallet.
Online brokers are another great option where to buy Compound (COMP), which is increasing in popularity lately due to ease of trading, fast transaction, and greater control over the digital assets in your portfolio.
When you use a broker platform, you gain access to a comprehensive feature set that will assist you in more precisely calculating your strategies and risks. As a result, you will be able to add more indicators to the chart and use the built-in technical analysis tools. However, unlike an exchange, the broker platform will not provide you with the same large offer of cryptos to trade.
Additionally, global brokers like CAPEX also provide a few options to indirectly invest in Compound and other cryptocurrencies: cryptocurrency Exchange-Traded-Funds (ETFs) and companies connected to cryptocurrencies (crypto stocks).
Buying Compound (COMP) over an exchange
If you want to participate in a crypto project development and own the digital asset, you can buy Compound (COMP) online through a cryptocurrency exchange, such as Binance, Kraken, Bittrex, or Coinbase, and store it in a digital wallet.
Having an account on a cryptocurrency exchange allows you to send and receive Compound (COMP). Transferring Compound is like the way traditional bank transfers work, except for the bank account address, which is replaced with a Compound address. Because digital currency is transmitted directly between individuals without needing third-party entities, such as banks, transaction fees are cheaper than those charged by traditional institutions.
If you want to hold your crypto for a longer time, it is advised to transfer them from the crypto exchange to a secure cryptocurrency wallet. Wallets are much safer, and each private crypto wallet has a private key. It is critical to keep your private key safe because you won't be able to access your crypto without it, and if it's easily available, your funds could be stolen.
Buying Compound (COMP) through an exchange is for those who want to use it for day trading or purchasing crypto to transfer to a wallet. When you’re buying Compound (COMP) through a cryptocurrency exchange, you own the digital asset, and you can transfer it to a crypto wallet or do whatever you wish with it. If the price of Compound rises, then the value of your portfolio goes up as well. But if the price of Compound (COMP) falls, then the value of your portfolio falls, while the amount of Compound (COMP) remains the same.
Here are the main drawbacks when buying Compound (COMP) through a cryptocurrency exchange:
- Cryptocurrency exchanges may not be regulated in your country and offer little to no protection for investors.
- The matching engines and servers on Compound (COMP) exchanges are often unreliable, leading to the inability to access your account and control your funds.
- Cryptocurrency exchanges have many restrictions and limitations for their services, including transaction fees, withdrawal fees, and imposing minimum amounts for funding and withdrawing funds.
The good news is that investors can limit the risks presented by the crypto exchange by trading Compound (COMP) with contracts for difference (CFDs). Compound (COMP) CFDs allow you to speculate on the price of the cryptocurrency without having to own the digital asset.
Read on if you want to learn to trade Compound with capex.com in the most convenient way.
Buying Compound (COMP) with an Online Broker
Trading Compound (COMP) with an online broker like CAPEX means that instead of owning Compound outright, you’ll be speculating on its price with CFDs.
The main difference between buying Compound (COMP) from an exchange and buying Compound (COMP) from an online broker is that you don’t own Compound (COMP) when you use a broker. Owning crypto requires investors to have a crypto wallet, either within the exchange or a private wallet. But when you purchase Compound (COMP) CFDs using an online broker, the CFDs are stored in your account and are far more liquid, which makes trading CFDs more popular. Unlike cryptocurrency exchanges, online CFDs brokers are regulated by financial authorities.
The Alternative Way to Invest in Compound (COMP)
Trading CFDs is a process of buying or selling CFDs and can generate a profit if the value of the asset moves in the direction of the investor’s prediction, or a loss if the market goes against him.
You can buy Compound CFDs (go long) if you believe the value of the digital asset will increase.
At the same time, you can “go short” if you believe that the price of the underlying asset, in this case, Compound (COMP), will decrease, by selling CFDs.
Trading CFDs provides leverage, and you can open your position by depositing only a margin.
For example, if a trader wants to buy 100 Compound CFD at $180 would only require $9,000 of trading capital.
It’s important to remember that leverage can increase both your profits and your losses, and they will be based on the full exposure of the trade, not just the margin requirement needed to open it. Potential losses, as well as profits, could exceed your margin.
Concisely, if you choose to trade crypto CFDs, you can profit from the difference between the buying and the selling position.
With CAPEX, you can trade CFDs on futures or spot prices. Trading CFDs on futures gives you exposure to the futures market, but without requiring you to take on any obligations or worry about any of the other nuances that are associated with futures trading.
Buy Compound COMP CFDs - Go Long
Instead of taking ownership of Compound, you can place a ‘long position’ translates to buying Compound CFDs. Your position, or Compound CFDs, will increase in value according to the increase in the price of the digital asset Compound’s price increases. If the price of Compound falls, then your position will lose value and can lead to loss.
Let’s assume that Compound is trading at a sell/buy price of 180.00/182.00 USD. You want to buy 100 CFD (units) because you think the price of Compound will go up. Compound has a 1:2 leverage or a margin rate of 50%, which means that you must deposit only 50% of the position’s value as position margin.
In this example, your CFD position margin will be $9,100 (50% x (100 units x $182 buy price)). Losses greater than the margin can occur if the price of Compound moves against your position.
Outcome A: a profitable trade
If your prediction was correct, and the price of Compound surges over the next hours or days, then you have made a profitable trade. If the sell/buy price is 202.00/204.00 USD when you decide to close your position by selling at 204.00 (the new sell price), then your profit will be $2,000.
The price has moved $20 (202 - 182) in your favor. Multiply this by the size of your position (100 units) to calculate your gross profit which is $2,000.
If the position was closed during the day, there will not be any swap charges and the net profit is $2,000.
If the position was closed after a few days, there will be swap charges according to the overnight rollover specification, in this case, -0.0563%.
Let us assume the position was closed the next day, the overnight swap calculation formula will be:
- Overnight swap = 100 (units) x $190 (price at rollover) x 0.0563% x 1 (days) = $10.7
Therefore, your total profit on Compound CFD is your gross profit plus the rollover cost.
- $2,000 - $10.7 = $1,989.3 net profit
Outcome B: a losing trade
If your prediction for the price of Compound was wrong, the Compound CFD trade will result in a loss. Let’s assume that the price of Compound drops over the next hour to a sell/buy price of $187.00/189.00. Because you want to limit the loss in the eventuality that the price continues to drop, you can sell at $37.30 (the new sell price) to close the position.
The price has moved $5 (187-182) against you. Multiply this by the size of your position (100 units) to calculate your loss, which is $500.
Sell Compound COMP CFDs - Go Short
In this CFD example, Compound is trading at a sell/buy price of 202.00/204.00 USD. Assume you want to sell 50 CFDs (units) because you think the price will go down. Compound has a 1:2 leverage or a margin rate of 50%, which means that you only must deposit 50% of the position’s value as position margin.
In this example, your CFD position margin will be $5,050 (50% x (50 units x 202.00 sell price)). Remember that if the price moves against you, it is possible to lose more than your initial position margin of $5,050.
Outcome A: a profitable trade
Your prediction was correct, and the price falls over the next 2 days to a sell/buy price of 192.00/194.00 USD. You decide to close your trade by buying back at $194.00 (the new buy price).
The price has moved $8 (202.00-194.00) in your favor. Multiply this by the size of your position (50 units) to calculate your profit, which is $400 gross.
Let us assume the position was closed after 2 days, the overnight swap calculation formula will be:
- Overnight swap = 50 (units) x 196.00 (average price at rollover) x 0.0118% x 2 (days) = $2.31
Therefore, your total profit on Compound CFD is your gross profit plus the rollover cost.
- $400 + $2.31 = €402.31 net profit
Outcome B: a losing trade
Unfortunately, your prediction was wrong, and the price of Compound COMP rises over the next hour to a sell/buy price of $204.00/206.00. You feel the price is likely to continue up, so to limit your potential loss you decide to buy at $206.00 (the new buy price) to close the position.
The price has moved $4 (206.00-202.00) against you. Multiply this by the size of your position (50 units) to calculate your loss, which is $200.
If you are not ready to trade CFDs at spot or futures prices yet, we have also got educational resources like CAPEX Academy with free courses on how to trade. Plus, we offer a demo account – giving you $50,000 in virtual funds to build your confidence in a risk-free environment.
Investing in Compound without actually buying Compound
While buying and day trading cryptocurrency is a major trend right now, it is important to remember that cryptocurrencies are a volatile and risky investment choice. If investing in crypto on an exchange or via a broker does not feel like the right choice for you, here are a few options to indirectly invest in Compound and other cryptocurrencies:
Exchange-Traded Funds - Crypto ETFs
Exchange-traded funds (ETFs) are popular investment tools that allow investors to buy exposure to hundreds of individual investments in bulk. That is why ETFs are a means of diversification for your portfolio and as less risky than investing in individual investments.
A crypto ETF allows investors to trade cryptocurrency on a traditional market and eliminates the need to trade the asset on a crypto exchange. Another advantage of trading crypto ETFs is that investors do not have to worry about the security aspects of trading crypto.
US investors can enter the crypto market by using ProShares Bitcoin Strategy ETF (BITO). The Fund provides capital appreciation through managed exposure to bitcoin futures contracts.
A Compound ETF could come in 2022. The approval of a Bitcoin ETF means a similar offering for Compound is imminent.
>> Learn what is an ETF and how does it work
Companies Connected to Compound and Cryptocurrency - Compound Stocks
Another option is to invest in cryptocurrency indirectly by investing and buying shares of companies that offer real-life products and services but still use or own cryptocurrencies as part of their business model (known as Compound stocks). With an all-in-one trading account with CAPEX, you can also trade shares CFD of public companies like:
- Visa (V) is a global payment service and is unlocking crypto opportunities for businesses and consumers and is helping adoption and investment worldwide. Visa's crypto solution is making digital assets interoperable and it creates a bridge between traditional fiat and digital currencies. Learn how to buy Visa shares
- Oracle (ORCL). The company offers Oracle blockchain, which is a collaboration framework that shares reliable data. Oracle provides easy ways to adopt blockchain technology, including an on-premises edition, a cloud service and a SaaS application that can be used for the supply chain management. Learn how to buy Oracle shares
- Square (SQ). Since October 2020, Square has purchased over $220 million worth of Bitcoin. As of February 2021, this payment services provider stated that 5% of its cash is stored in Bitcoin. Their app, Square Cash, allows clients to buy, sell and trade crypto. Learn how to buy Square shares
- Coinbase (COIN). Coinbase is a cryptocurrency exchange that allows consumers, financial institutions, and businesses to transact between fiat and cryptocurrencies and securely store and use cryptocurrencies. Learn how to buy Coinbase shares
- Tesla (TSLA). Tesla is an electric vehicle manufacturer, has always been a staunch supporter of digital currencies and started accepting them as payments in February 2021, when the company purchased $1.5 billion worth of bitcoin. Learn how to buy Tesla shares
- CME Group (CME). CME is a financial derivatives exchange that offers trades in cryptocurrencies as well. In Q3 2021, the company reported a 14% year-over-year increase in its average daily volume (ADV) at 17.8 million contracts. Learn how to buy CME shares
>> Learn more about stock investing
How to buy Compound (COMP)
Are you wondering how to buy Compound with CFDs? CAPEX offers COMP trading via CFDs on Compound USD spot prices to speculate on the value of COMP against the most popular currency, as well as the brand-new PRO Shares Bitcoin Strategy ETF. Here are the steps:
Step 1: Create an account and deposit funds
When you trade on cryptocurrencies, instead of purchasing Compound and other popular digital currencies, you can be ready to open a position much faster. You do not need a digital wallet or an account with an exchange. In fact, all you need to trade via CFDs is an account with a leveraged trading provider.
With CAPEX, you can open an account in minutes, and there is no obligation to add funds until you want to place a trade.
When you create a trading account with CAPEX, you will be able to:
- ‘Buy’ (go long) or ‘sell’ (go short) Compound and other popular cryptocurrencies to speculate on their price rising or falling
- Take a position on our range of ETFs to get exposure to a basket of shares from an entire country, index, or sector that could be rising or falling in price.
- Trade a host of global indices to go long or short on the performance of an entire economy with a single trade.
- Use QuantX, the smart portfolio builder that helps you cover the popular industries and only invest in the top-performing stocks.
Step 2: Choose your Crypto trading platform
Our trading platforms can provide you with a smarter and faster way to trade Compound CFDs – with personalized alerts, interactive charts, trading signals, and built-in risk management tools. You can trade via the CAPEX trading platform using:
CAPEX Web Trader
Trade on one of the most complete, fully customizable trading platforms on the market.
Available on desktop (Windows, Mac) and mobile (Android, iOS), it provides intuitive, web-based access to a vast range of tradable instruments, charting tools, analytical tools, and many more features.
To view Compound's real-time price and chart on the trading platform can click on the "Search" icon located in the left panel or by clicking on "Cryptocurrency" and then select the instrument, in this case, Compound (COMP).
MetaTrader 5, one of the best crypto trading apps, is providing superior tools for comprehensive price analysis, use of algorithmic trading applications (trading robots, Expert Advisor), and copy trading.
MetaTrader 5 is available on both desktop and mobile.
Step 3: Pick up a Compound trading strategy
Learning how to buy Compound is easy but adopting the right Compound trading strategy is essential to time the market.
The main Compound trading strategies are:
Buy and hold, also called position trading, is an investment strategy whereby an investor buys Compound to hold them long term, with the goal of realizing price appreciation, despite volatility.
Traders take a position according to the main trend (months to years). You can “go long” if Compound is in a bullish trend or “go short” if the Compound trend is bearish. If the major trend starts to slow or reverse, you will think about closing your position and opening a new one to match the emerging Compound trend.
All trades are performed during the day. There are no open positions overnight, though no rollover charges. Traders are looking to profit from Compound’s short-term price movements (including scalping), and it can enable them to make the most of daily volatility in bitcoin’s price.
When you hedge Compound, it means that you use CFDs to counteract the Compound price movement you already own. For example, if you owned some Compound but were concerned about a short-term drop in their value, you could open a short position on Compound with CFDs. If the Compound price falls, the gains on your short position would offset some or all the losses on the coins you own.
Following the chart patterns and general trends can give you a hint to where Compound is going.
Step 4: Set your Compound orders
A trade order is an agreement to buy or sell a specific asset like Compound at a specific price or price range.
To buy Compound CFD with CAPEX, click on the "Buy" button and a window is displayed to configure the purchase order. You can choose among Market, Limit, and Stop orders.
Additionally, you can pre-define Stop Loss and Take profit orders, which are crucial risk management tools – that help you minimize the potential loss and maximize the potential gains.
How to buy Compound with Market Orders
The simplest type of trade order is a market order. Market orders are usually placed by traders if they want to be certain trade is executed. A market order is instant. Therefore, it is simply an order placed by a trader to buy or sell Compound immediately at whatever its current price is.
I want to buy 200 Compound (COMP) right now or as quickly as possible.
How to buy Compound with Limit Orders
While a market order is simply an order placed by traders to buy or sell an asset immediately at whatever the current price, a limit order in its most basic sense, is an order to buy or sell an asset at a specific price. Buy limit orders are placed above key support levels with the purpose of limiting price risks anticipating the uptrend will resume after a correction (buy the dip).
The price for COMP/USD is currently at USD 36.00 and you place a buy limit order at USD 31.00, then your order is meant to execute at the price of USD 31.00 as soon as there is a matching sell order at this price or better.
How to buy Compound with Stop Orders
A stop order is an order that becomes a market order only once a specified price is reached. It can be used to enter a new position or to exit an existing one. Limit orders are placed above key resistance levels anticipating a breakout after a consolidation.
The price for COMP/USD is currently at USD 36.00 and you place a buy stop order at USD 37.50, then your order is meant to become market at the price of USD 37.50 as soon as the price is reached.
Step 5: Monitor and close your Compound position
To open a Compound trade, you’d buy if you thought that the price was going to rise or sell if you thought the price was going to fall. Once your trade is open, you’ll need to monitor the market to make sure that it’s moving in the way you anticipated.
The technical indicators available on our trading platform can help you to determine what Compound’s price might do next. Indicators can also help you monitor current market conditions like volatility levels or market sentiment.
CAPEX WebTrader can deliver an in-depth analysis of the charts and offers over 90 indicators (including moving average, MACD, RSI, and Bollinger Bands). The WebTrader platform also supports an interactive trading activity with high-end research tools helping you interpret market data.
Take Profit & Stop Loss
Traders can close a position immediately to take a profit or to cut a loss. You can use market order or set Stop Loss and Take Profit levels when you set the order to buy Compound.
The platform offers the stop-loss option, which lets you clearly state how much you're willing to risk with your trade. Similarly, the take profit is the exact opposite. It tells your broker how much you expect to make as a profit and when you want to close your position.
Any profits you make will be paid directly into your trading account. Losses are deducted from your account balance.
When to buy Compound (COMPUSD)
Investors should be aware of the fundamental and technical analysis when deciding when to buy Compound. The fundamental analysis considers the news and events about the coins, exchanges, and other crypto businesses. The technical analysis uses the price value history to map the evolution of the supply and demand for Compound.
Compound Price Prediction using Fundamentals
When using the fundamental analysis approach, investors should be aware of the government regulation, latest cryptocurrency updates, and technical issues, as well as cryptocurrency exchanges that affect the supply and demand for cryptocurrencies.
For instance, when Bitcoin CME was introduced into the government regulations, and it drove the price of Bitcoin to almost $20,000 in December 2017.
An accurate Compound price forecast using fundamental analysis considers the three main aspects:
- Blockchain metrics (hash rate, active addresses, transactions fees, and values)
- Financial (market capitalization, liquidity, trading volume, circulating supply)
- Project overview (team’s background, whitepaper, competitors, roadmap, tokenomics)
>> Learn how to forecast Compound price with fundamental analysis
What is the future of Compound?
DeFi protocols like Compound are intended to rebuild traditional financial systems such as banks and exchanges that use blockchains enriched by self-executing smart contracts. The overall sentiment in decentralized finance (DeFi) markets can affect the price prediction of Compound (COMP).
This was evident when Binance reported in November 2021 that DeFi tokens lost between 70% and 90% in two months. COMP is worth exploring if you are interested in what it has to offer. However, sentiment can change quickly and there could be periods when this governance token trails Bitcoin during price surges.
COMP's success is also threatened by the emergence of new DeFi protocols all the time. A younger, more competitive market, where crypto enthusiasts are constantly on the lookout to make the most of their gains, could allow a new upstart to easily take market share from Compound. In some cases, it only takes a few days for a protocol's ranking to climb the ranks.
PancakeSwap, for example, has quickly established itself as the most popular decentralized exchange on the Binance Smart Chain. Sometimes trading volumes have outpaced UniSwap which was one of the first platforms in this space.
The Compound protocol has established itself as an efficient network that works well. These features could help the Compound gain a higher price. The price will surge significantly if the push for functional crypto continues through 2022.
Because is difficult to analyze the intrinsic value of a cryptocurrency, it is recommended you perform a technical analysis before investing in Compound CFDs. It might offer some insight into the past movements of Compound, helping you predict where it will head in the future.
Compound price prediction using technical analysis
Some believe the high concentration of retail traders makes cryptos truer to traditional chart patterns and indications of oversold, overbought conditions, etc.
Technical analysis techniques can be applied to any market where the price can freely fluctuate, and data is available to see those fluctuations. The CAPEX Web Trader has a full suite of all the best-known technical indicators and chart drawing tools.
>> Learn how to forecast Compound price with technical analysis
Compound Forecast 2022
Compound could be a good long-term investment. Analysts predict a price increase over time, but there is no guarantee that it will be a steady increase. Predictions can be made but are not guaranteed.
It is not an exaggeration to say that Compound prices could break through all barriers and stand the test of time. As of December 2021, Compound’s price stands at $185, with a market cap of $1,790.846,649. The COMP 24-hour trading volume is $1,142,357,027 and the circulating supply is 6,207,618.07 COMP (62%) out of the 10 million maximum supply.
This digital asset will perform at an exuberant rate scaling the peak if all market factors favour Compound price. The Compound price will surpass all limits over the next year. Even though it might show some slow trends, it would be a great investment. Analysts predict the COMP price could reach $600 at the end of 2022.
WalletInvestor says the Compound coin's price could reach $217 by the end of 2022, and $315 by 2026.
DigitalCoinPrice predicts COMP price at $277 by the end of 2021. They’re also optimistic about the end of 2022 when they predict a price of $322 and $640 by the end of 2026.
LongForecast predicts that the Compound coin will rise and fall before hitting somewhere between $118-147 in January 2026. Always do your research and remember that your investment's value can fluctuate. You should never invest more than what you can afford.
What Moves Compound Price
The most important aspects that can influence the Compound price are:
- Total supply
- Rules and regulations
Compound’s price corresponds to the current supply and demand in the crypto space. Considering Compound has a fixed maximum supply of 10 million COMP, it is a digital asset that will experience scarcity as more investors join the Compound protocol and the DeFi market.
An important aspect of what moves the price of Compound is the news.
For instance, the price of COMP plunged after an epic upgrade, when nearly $90.1 million has been dropped to users of the Compound protocol. There was a bug in the code of the smart contracts, that delivered the unexpected tokens. The founder asked for the return of crypto tokens on the platform and issues a few threats.
In conclusion, should you Buy Compound or not?
As with any investment, make sure you carefully assess your financial situation before investing in cryptocurrency, Compound, and the stock market. Compound can be extremely volatile—a single tweet can make its price plummet—as cryptocurrencies are still a highly speculative investment. Follow the already famous crypto investment phrase — "invest only what you can afford to lose".
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