DeFi Protocol Compound (COMP) Flashes Buy Signals, Technical Indicators Show

Roughly $6 billion were wiped out of the cryptocurrency market in the past 24 hours. The massive cash outflow was felt throughout the entire market as most digital assets went into the red. The sudden bloodbath also saw the liquidation of $13 million worth of long Bitcoin positions on BitMEX alone.

The Cryptocurrency Market Turns Red. (Source: Coin360)

Some of the most prominent figures in the industry fear that the recent sell-off will push the flagship cryptocurrency below $8,800. The downswing could have the potential to cancel BTC’s rally towards $20,000 this year, according to Mohit Sorout, a founding partner at cryptocurrency fund Bitazu Capital.

Despite the increasing probability of a further downturn, sizable opportunities usually present when fear reigns the market. Such is the case that the autonomous interest rate protocol Compound (COMP) might be poised to rebound based on a particular technical index.

Compound Flashes Buy Signals

The Tom Demark (TD) Sequential indicator has proven to be essential in determining the price action of some of the most popular cryptocurrencies in the market. For this reason, several analysts in the industry, such as Tone Vays and Thomas Thornton, put a lot of emphasis on it to identify local tops and bottoms.

Following the downward pressure that Compound has seen since July 6, the TD setup estimates that this cryptocurrency may soon reach oversold territory. Based on COMP’s 1-day and 12-hour charts, the TD index will likely present a buy signal within both time frames in the next 10 hours. The bullish formations are expected to develop as a red nine candlesticks.

If this were to happen, the TD Sequential forecasts a one to four candlesticks upswing or the beginning of a new upward countdown.

Compound Approaches Oversold Territory Based on the TD Setup. (Source: TradingView)

IntoTheBlock “In/Out of the Money Around Price” (IOMAP) model reveals there isn’t any major supply barrier that could impede Compound from rising towards $175 if demand were to pick up. But around this price level, the DeFi token may find a strong supply wall.

The IOMAP cohorts show that 371 addresses had previously purchased over 73,500 COMP between $173.8 and $175.7. Holders within this price range may try to break even in the event of an upswing since their long positions are currently underwater.

The Most Significant Resistance Ahead of Compound Sits at $175.5. (Source: IntoTheBlock)

There’s Potential For More Downside

While Compound seems to be preparing for an upswing, not everybody is convinced about is upside potential. Trading aficionado Theta Seek maintains that the way COMP’s governance has been structured does not make sense, so its price could fall below $100 “unless a revenue model is proposed soon.”

“The value of the protocol is an AUM [assets under management] business and AUM businesses are normally valued at less than 1/3 or 1/4 of the companies’ AUM… Given that the COMP’s market cap is at $2 [billion] when there’s $1 [billion] of AUM, the fair value of the token should be at around $50 today,” affirmed the analyst.

With this in mind, investors should pay close attention to the $150 support level. Moving past this hurdle may have the ability to jeopardize the bullish signals previously mentioned and push the price of Compound further down.

Featured Image by Depositphotos
Price tags: compusd, compbtc
Chart from TradingView.com