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Governance token patterns: Can we expect COMP to reach 1.6K USD?

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DappRadar

What’s next for the rising COMP token?

There are plenty of examples of governance tokens in the industry. The well known MKR token is issued by MakerDAO. ZRX is issued by the 0x project and recently the COMP token was released by Compound finance.

Governance tokens give holders the power to influence decisions concerning the core protocol, product, or future roadmap. Even decisions on staffing and other changes to governance parameters can be controlled this way.

They also ensure the decentralization that gives blockchain applications their immunity to centralized administrator control. 

In order to better understand and project and what we can expect from COMP in the future, we looked at the beginnings of other top DeFi governance tokens. Specifically MKR and ZRX.

Key takeaways

  • COMP surpassed 3 billion market capitalization on 23.06.20
  • MKR’s all-time high was around 1700 USD (now 520 dollars)
  • ZRX’s all-time high was around 2.5 dollars (now around 0.39 dollars)
  • At the time of writing, COMP price has surged 230% from its initial price, reaching 240 dollars

Top 3 DeFi governance tokens

Last week DappRadar reported on a huge spike in the price of the COMP token. Within 24 hours COMP became the number 1 token by market capitalization in the DeFi category.

At the time of writing, we see that the COMP market capitalization is four times higher than the recent leader Maker with a market capitalization of 2.4 billion USD. On the 23rd of June, it reached more than 3 billion USD in market capitalization.

COMP has been hot news recently but what we want to look at and attempt to project here is where we could potentially see the price go. Before we get into the COMP price topic its important to set some benchmarks by looking at the most well-known governance tokens.

MKR token

The Maker (MKR) is an ERC-20 token that was created by MarDAO and its primary purpose is to support the stability of MakerDAO’s DAI token and enable governance for the Dai Credit System. Holders of MKR make key decisions on the operations and future of the system.

MKR was listed back in 2017 and the price of the token surged at the beginning to 1.8K USD but for the past two years has settled around 520 dollars – 71% lower than its all-time high.

The MKR token has been present for three years and has provable adoption rates despite events like Black Thursday the token recovered and seemed to be increasing over the last few months.

ZRX token

ZRX is another governance token by the 0x project. The token allows 0x users to vote on improvement proposals that evolve the system over time. ZRX token holders can also delegate ZRX to market maker staking pools to earn protocol liquidity rewards (in ETH).

ZRX’s highest price was around 2.5 USD while for the last couple of years is around 0.38 USD – 86% lower than its an all-time high. 

Similar to the MKR token ZRX also had some peak prices but returned to a stable price – 86% lower than an all-time high price.

Can we expect COMP to 3x soon?

COMP is the native governance token behind the leading lending protocol Compound finance. COMP is used to vote on protocol upgrades including protocol fees, supported collateral, and interest rate changes.

At the time of writing the COMP price has increased by 230% from its initial price and is slightly lower than its highest price on the 22nd of July 2020.

At the time of writing, the COMP price is already 2.5 times higher than its initial price but according to recent trends – it’s not the end.

What if the same pattern repeats for COMP?

Have you ever wondered if similar governance tokens have the same patterns? What if one governance tokens performance could help you project the new ones?

The logic behind the calculation provided is that we observed how the prices of MKR and ZRX changed at the beginning of the token’s life. The percentage change of the price during its first year of existence was calculated and applied to COMP token.

According to the projection, we might expect COMP to reach more than 1.6k USD.

Conclusions

In the past, we observed a general pattern that once a governance token is distributed a peak price is seen within a few months. Additionally, we can state that within three years of distribution the tokens we observed are way more stable than at the beginning. 

If to apply the same logic and the same percentage change we might see the COMP token price rise 5/6 times higher than it is right now.

Data sources and limitations

The article is based on the percentage change of the two biggest DeFi governance token. All of these token are quite different from each other and additional factors might lead to the different development of COMP token value.

We will continue watching this space. Make sure you bookmark DappRadar and sign up to our newsletter below to get updates direct to your inbox.

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