COMP/USD looking to break out of parallel channel
The Compound token has declined by 3% but analysts say it is poised for a major rally
A strong rally since June 18 has seen Compound token (COMP) become an interesting altcoin, with a price rally of over 300% highlighting the growth and demand in the decentralized finance (DeFi) sector. Currently, COMP ranks 31 among the largest cryptocurrencies by market cap.
Compound is the token with the second-highest total value in US dollars locked in DeFi protocols.
Over $580 million worth of value is locked in the protocol, with FOMO-driven buyers adding more than 66,000 ether tokens in the past 24 hours alone.
COMP/USD has declined 3% in the past 24 hours and is now more than 5% down on its value from a week ago. But despite the decline, a look at the technical picture suggests it is up for a nice rally.
As shown in the chart below, Compound is trading near the upper limit of a parallel channel. The coin recently broke out of a falling wedge and price has already tested the lower boundary of the said channel. However, bulls have retested the top twice.
COMP/USD is also trading below the Fibonacci cluster and both the 20-day and 50-day simple moving averages on the 4-hour time frame.
But with renewed interest and demand for the Compound token, a breakout orchestrated by a 3rd wave is imminent.
While sellers may want to push for July 16 lows of $151, a surge in buying pressure is likely to see buyers test daily resistance at $172.59. This area is marked by the 78.6% Fibonacci retracement level on the downward trend that capped highs at $174 and provided support at lows of $154.
If Compound manages to sustain gains above the channel, it can flip green on increased buy volume. Another 300% spike could be on its way.
DeFi helps slash Bitcoin’s dominance
According to analysts, Bitcoin’s lull is due to low volatility and will likely persist for the next couple of months. That is going to be the case and BTC/USD will remain range-bound before a return to high volatility heralds a new rally.
Meanwhile, the limelight is with the alternative cryptocurrencies (altcoins) which have pushed Bitcoin dominance lower.
The DeFi craze, so christened after the incredible soar by coins like Aave (LEND) and Compound (COMP) in mid-June, has also been one of the factors that have contributed to Bitcoin’s dominance dropping to 62%.
It is the lowest market share value for the world’s largest cryptocurrency by market cap- the last time altcoins had more in crypto market share was on February 18th, 2020.
BTC/USD is trading at around $9,230 as of writing, up by about 0.4% in the past 24 hours.