- Total value of DeFi-locked funds plunged about $1 billion over recent days
- COMP price collapsed over 70% in the past 3 months to trade below $100
- The price action is now approaching the key short-term support line at around $79
Compound (COMP) price has continued its collapse this month after losing about 65% since August
Fundamental analysis: DeFi Investors lock in profits
A high number of DeFi coins are still far away from their highs in spite of Bitcoin hitting its yearly peaks.
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Data by crypto intelligence provider IntoTheBlock indicates that DeFi token prices and protocol metrics have deviated substantially since September, with the total value locked plunging about $1 billion over recent days but managed to close to its all-time peaks.
However, prices of DeFi tokens are still significantly down, with some of them dropping as much as 50% compared to their highs. IntoTheBlock report alleges that this deviation could be a result of a transition to a risk-off environment as investors have been locking in profits.
DeFi tokens with high supply inflation tokens were affected the most, with Compound, Balancer, MCDEX, Curve, and mStable dropping over 60% since September.
“This demonstrates that while liquidity mining can fuel supply-side demand, it can also lead tokens to suffer from setbacks akin to depreciation arising from hyperinflation.”
Ethereum-powered DeFi tokens have plunged by around a third from $7.5 billion to $5.07 billion in market value just during last month.
On the other hand, stablecoins and types of wrapped Bitcoin keep rising in terms of market value, suggesting that yield farmers have abandoned high-risk DeFi tokens and embraced lower yield producing assets with lesser volatility.
According to the report, Compound Finance, which stimulated the decentralized finance farming frenzy, may also have prompted the correction since it supplied the inflection point for such quick growth.
The rollout of the COMP token resulted in the generation of hundreds of clones and forks, each with their own governance tokens and yield farming pools, leading to the growth in liquidity and token prices until the collapse of the market that occurred in September.
Technical analysis: Nearing key short-term support
Compound (COMP) price has crashed in the past three months. The coin lost over 45% in September before dropping a further 31.6% in October. These losses have extended into November with COMP already down more than 7%.
COMP price daily chart (TradingView)
A good news for the buyers is that the price action is now approaching the key short-term support line at around $79. This is where the 127.2% Fibonacci extension line comes in as COMP bulls looking for a rebound to at least $120.
Recent data suggested many decentralized finance coins are still nowhere near their peaks as yield farmers decided to lock in profits. This is one of the reasons why COMP price collapsed over 70% in the past 3 months.