With Bitcoin and many digital currencies rising to all-time highs, coin-rich but increasingly cash-strapped traders are flocking to decentralized financial lending platforms where they can pool their holdings to raise money for new investments.
Compound is one of the leading DeFi lending platforms, and over the past month, TVL token price and governance have risen to new heights.
Compound, which ranks third among DeFi’s lending protocols, has $ 4.55 billion in assets locked on the platform and doubled its COMP governance code over the past week. COMP is currently trading for $ 566, an all-time new high and a 325% increase since the start of 2021.
The stock buying restrictions highlight the need for DeFi
Although there are no major announcements that appear to have spurred the current rally of COMP, the project has recently merged with Ledger’s Lend platform that allows wallet users to interact with the composite platform and lend their stablecoins.
On January 29, Compound co-founder Robert Leshner discussed stock buying restrictions that brokerage firms like Robinhood have placed on stocks like AMC and GameStop.
According to Leshner, all markets are affected by long commercial settlement times due to the Depository Trust & Clearing Corporation (DTCC) structure, and he suggested that “markets operate on blockchains” as a “long-term answer” to the problems currently being faced.
“An immediate settlement would eliminate most of the complexities, cost, and capital requirements that plagued the T + 2 settlement. Robinhood would not have credit commitments, or the need to turn on its customers.”
While COMP was trading for $ 241, the added attention that GameStop’s failure brought to the crypto sector and DeFi may have spurred some investors to try Compound and other decentralized exchange platforms.
Corporate penetration comes after the main vote on governance
On February 1, the COMP 36 proposal reached the threshold required to allow for a three-day community vote period, which ended on February 12.
The proposal, which sought to allow the “Community Independent Proposal (CAP) to increase the Warranty Factor (CF) for WrappedBTC from 60% to 75%” on the platform, was passed by a wide margin and will be implemented after a two-day waiting period.
This announcement followed another buying spree, pushing COMP price 54% up from $ 382 in early trading hours on Feb 4th to $ 555 on Feb 5th.
With interest from institutional investors growing and big-name influencers like Elon Musk and Mark Cuban promoting the benefits of decentralized financing and the return it provides, the current upside in TVL is poised to rally as token values and protocol sharing rise to new highs.