Compound Labs announced plans to launch a dedicated foundation to support protocol development
COMP price initially fell 6% to $42 following the announcement
COMP experienced an intraday rally of nearly 100% before facing rejection
Long-term holders are selling as shown by 17-month high in “Age Consumed” metric
Price needs to reclaim $44.60 as support to shift to a bullish outlook
Compound Labs, the team behind the popular DeFi lending protocol Compound Finance, recently announced plans to launch a dedicated foundation to streamline operations and support the protocol’s long-term development. This news created significant price volatility for COMP, the protocol’s native token.
The announcement came on April 1, with Compound Labs noting that establishing a foundation has become standard practice across major DeFi ecosystems. The team believes a similar structure would bring more stability, legal clarity, and community alignment to Compound’s operations.
In June 2020, the Compound protocol was decentralized with the launch of COMP and the full transfer of control to the community through governance. As a foundational piece of decentralized finance infrastructure, Compound is designed to exist in perpetuity—open, autonomous, and…
Compound is one of the most popular DeFi lending protocols on Ethereum. According to DefiLlama data, the platform currently has $2.5 billion in total value locked (TVL).
Following the announcement, COMP initially fell roughly 6% to a local low of $42. The token later recovered slightly to trade at approximately $45.
Wild Price Swings
The market reaction to the foundation news has been volatile. COMP’s price surged by 102% during the intraday high on Tuesday before dropping back down. Over 24 hours, COMP rose by 10%, with the crypto token’s price trading at $43.68.
While the rally was notable, the price remains under pressure due to ongoing skepticism from investors. The failure to secure $44.60 as support suggests that further declines are possible.
If the current bearish sentiment intensifies, COMP could face additional downward pressure. Technical analysis suggests that if current trends hold, COMP could fall to $37.62.
For the bearish outlook to be invalidated, Compound needs to regain and secure $44.60 as support. If this happens, the price could rise through $48.44 and potentially surpass the $50.00 mark.
Investor Sentiment Turns Negative
Market indicators show increasing concern among investors. The Chaikin Money Flow (CMF) indicator has recently reached an all-time low, signaling major outflows from Compound.
Investors have been quick to act, cashing out their holdings as concerns over the Compound Foundation announcement continue to linger. This suggests investors are reacting to short-term factors and are deeply concerned about the broader implications for the token’s future.
The unusually high outflows suggest that the foundation announcement stirred strong negative sentiment. Initial optimism was dampened by questions about the necessity of such an organization.
The “Age Consumed” metric for Compound recently spiked to its highest level in 17 months, highlighting that long-term holders have started to sell their positions. This selling from patient investors is typically a bearish signal.
When long-term holders sell, it often signals doubts about the asset’s future growth. Since these investors typically hold for extended periods, their decision to liquidate suggests eroding trust in Compound’s future prospects.
This decline in investor sentiment could lead to continued selling pressure and further price declines in the near term.
The proposed Compound Foundation would be independent of Compound Labs and any existing entities. It would offer a layer of coordination and leadership for the protocol’s stakeholders.
Compound Labs said the foundation’s goal would be to provide a model similar to what the Uniswap Foundation offers its community, facilitating governance, development, and communication among contributors.
Before moving ahead, Compound Labs plans to gather community feedback through its forums.
The team acknowledged that the protocol’s early operational model was basic, reflecting DeFi’s experimental nature during its early days. As the platform matured, however, the lack of a central structure made managing critical processes more difficult.
Despite outsourcing areas like risk assessment to Gauntlet and security auditing to OpenZeppelin, the absence of a formal foundation created unnecessary complexity.
The team stated: “With the upcoming development of Compound v4 and growing engagement in the community forums, along with the progressive decentralization of the Compound ecosystem and the pullback of involvement from Compound Labs, we’ve seen the growing need for more consistent structure.”
COMP is currently trading at $43.68, caught between strong bearish signals and potential for recovery if it can overcome key resistance levels.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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