It’s been a tough past few days for the crypto market. Bitcoin and Ethereum are both down by approximately 5% in the past 24 hours, plunging as gold and the U.S. equities market drop in a fashion not seen in many weeks.
There are some cryptocurrencies that are holding strong, though. One of these is the Ethereum-based Compound (COMP) coin, the native governance token for Compound. COMP is up 7% in the past 24 hours, rallying to $190 and as high as $210 on decentralized exchanges.
Chart of COMP's price action against USDC on Uniswap. Chart from TradingView.com
Here’s why the DeFi-centric token is up while major cryptocurrencies drop.
Here’s Why Ethereum’s Compound Is Up Today
The key factor behind Compound’s growth over the past 24 hours is the launch of a new DeFi cryptocurrency called YAM for the Yam protocol.
Yam is an experimental Ethereum-based DeFi protocol that is attempting to meld the concepts of “yield farming,” governance, and price elasticity. As the blog post announcing the launch of the project reads:
YAM is a pseudo-stablecoin that has an elastic supply that can increase and decrease depending on market conditions to try and achieve a market value of $1.
The only way YAM can currently be purchased is to, 1) buy it through Uniswap pools or decentralized exchanges, or 2) deposit eight Ethereum-based crypto assets into the Yam protocol.
These eight assets are COMP, LEND, LINK, MKR, SNX, WETH, YFI, and ETH/APML Uniswap v2 LP tokens.
As Compound is a coin supported to “farm” the cryptocurrency, demand for the asset has picked up, hence the ongoing price increase. The other seven cryptocurrencies being used to generate YAM are also up over recent hours, responding to a spike in demand.
Does COMP Have Value in the Long Run?
While COMP is up to $190~200, some don’t think that the asset has value in the long run. One trader commented that weighing the fundamentals of the protocol, the Ethereum-based asset should only be worth around $50:
This may change, though, as Yam has outsized effects on the DeFi industry.
Featured Images from Shutterstock Price tags: ethusd, ethbtc Charts from TradingView.com Here's Why Compound (COMP) Is Up 7% While Ethereum Is Plunging
Leading global blockchain news provider. A blockchain, originally block chain, is a growing list of records, called blocks, that are linked using cryptography.