While the broader market’s bearishness has certainly impacted the price and growth of Compound [COMP], a significant contribution to the same also comes from decreasing demand. This is clearly visible when observing the on-chain statistics of the lending protocol.
Following the all-time high establishing rally of May 2021, COMP has seen a decline which is continuing even 13 months later. The altcoin took a major hit back in April after its attempts to breach and flip the downtrend into support failed. At the time, COMP ended up plummeting by 73%.
At the moment, the broader market’s bearishness is getting stronger, as visible on the Average Directional Index (ADX). This pushed the altcoin to the verge of slipping into the oversold zone, recovery from which will be terribly difficult for COMP.
Alas, as difficult as it is naturally for COMP to recover the losses, it isn’t seeing much support from its investors and holders either.
All the way down…
The lending protocol has been facing a gradual decline in the total amount deposited versus the total amount loaned. Back in December 2021, the Dapp had about $19 billion deposited in it and almost $7 billion loaned to users.
However, in the last six months, the figures have come down to just $4.6 billion in deposits, and the outstanding loans are at -$200 million.
The loan-to-value (LTV) ratio, which basically calculates the ratio of all outstanding loans to the deposits, is at -4% now. Most of the contraction in the ratio came over the last two months, before which this value stood at 33%.
However, investors pulling out of the protocol and the asset does make sense. Especially since they have been consistently losing their profits since May 2021.
A year ago, less than 3% of addresses fell victims to losses. On the contrary, at the time of writing, investors in losses now dominate 92% of Compound’s 187k addresses.
The likelihood of recovery on both ends is only possible if the broader market recovers. Especially since the Dapp’s growth has been rather lackluster of late.