Compound Finance (COMP) Price: Foundation Plans Spark Wild 102% Price Swing Then Retreat

• Compound Labs announced plans to create a dedicated foundation to streamline operations and support long-term development
• COMP token initially fell 6% to $42 following the announcement before slight recovery to $45
• The token later surged 102% during an intra-day rally before dropping back
• Chaikin Money Flow indicator reached an all-time low, signaling significant investor outflows
• Long-term holders began selling positions as shown by the “Age Consumed” metric reaching a 17-month high

Compound Labs, the team behind popular Ethereum-based DeFi lending protocol Compound Finance, announced plans to establish a dedicated foundation, triggering significant price volatility for its native COMP token. The announcement initially sent the token tumbling before a dramatic intra-day rally that nearly doubled its value, only to face renewed selling pressure as investor skepticism grew.

According to DefiLlama data, Compound Finance currently holds $2.5 billion in total value locked (TVL), cementing its position as one of the most widely used DeFi lending platforms on Ethereum.

In an April 1 social media post, Compound Labs revealed its intention to create an independent foundation. The team noted that establishing such entities has become standard practice across major DeFi ecosystems, pointing to the Uniswap Foundation as a model example.

Foundation Plans and Rationale

The proposed Compound Foundation would operate independently from Compound Labs and any existing entities. Its primary purpose would be to provide a reliable coordination layer and leadership for the protocol’s stakeholders.

Compound Labs explained that the protocol’s early operational model was basic, reflecting the experimental nature of DeFi in its early days. However, as the platform matured, the lack of a central structure made managing critical processes increasingly difficult.

Despite outsourcing risk assessment to Gauntlet and security auditing to OpenZeppelin, the team highlighted that the absence of a formal foundation has created unnecessary complexity in the protocol’s operations.

“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,” the team stated.

Market Reaction and Price Performance

Following the announcement, the COMP token experienced notable price volatility. The token initially fell approximately 6% to a local low of $42 before recovering slightly to trade around $45.

However, the market reaction took a dramatic turn when COMP surged by an impressive 102% during Tuesday’s intra-day high. This rally proved short-lived as investor skepticism quickly returned.

At present, COMP is trading at $43.68, reflecting a 10% increase over the last 24 hours but still showing signs of downward pressure as market participants evaluate the implications of the foundation announcement.

Technical analysis indicates that for any bullish momentum to return, COMP needs to reclaim $44.60 as a support level. If successful, the price could potentially rise through $48.44 and possibly break above the $50 mark.

Conversely, if the current bearish sentiment intensifies, COMP could decline further to around $37.62.

Investor Sentiment Indicators

Multiple market indicators suggest growing unease among Compound investors. The Chaikin Money Flow (CMF) indicator has recently reached an all-time low, signaling major outflows from the token.

This metric suggests investors are not only reacting to short-term price movements but are also concerned about broader implications for COMP’s future. The magnitude of these outflows indicates a lack of confidence that extends beyond typical market fluctuations.

Additionally, the “Age Consumed” metric for Compound recently spiked to its highest level in 17 months. This metric shows that long-term holders, who typically maintain positions through market turbulence, have begun selling their holdings.

When experienced investors who have held through previous cycles decide to exit, it often signals decreasing conviction in an asset’s growth potential. This behavior from long-term holders, occurring outside of a broader bull market, represents a potentially concerning signal for COMP’s near-term price outlook.

Before moving forward with the foundation, Compound Labs plans to gather community feedback through its forums, suggesting the proposal remains in the exploratory phase.