COMP price sheds 10% after Compound bug put $84 million in tokens at risk

Compound Finance has recently introduced a new upgrade to its protocol but additionally brought about a bug that leaves some users with unusual amounts of its native cryptocurrency, COMP, to be claimed.

Compound Finance faced with puzzling hitch

Compound Labs, the team behind the decentralized finance interest rate protocol, revealed that “unusual activity has been reported regarding the distribution of COMP” after Proposal 062 was introduced.

Proposal 62 aimed to split the distribution of COMP to liquidity suppliers and borrowers based on governance-set ratios rather than the previous 1:1 share model. The upgrade, which went into effect on September 29, also targeted minor bugs.

However, a new bug was infused in the recent upgrade as part of the Comptroller contract. This bug accidentally allowed certain users to claim as much as $50 million in COMP tokens. 

The Comptroller contract address contains a limited number of COMP tokens. Robert Lesher, the founder of Compound Labs, stated that at worst, the impact is bounded at 280,000 COMP, worth around $84 million.

The team added while no supplied or borrowed funds are at risk at the moment, Compound Labs and community members are investigating the discrepancies in the distribution of the protocol’s native token.

Lesher concluded that there are no admin controls or community tools to disable the COMP distribution. This means that any changes to the protocol would still require a seven-day governance process before being introduced to production.

COMP price to test strength of foothold

COMP price lost over 10% since the bug was revealed by Compound Finance. A spike in selling pressure emerged, sending the token to a swing low of $279.50. 

The DeFi coin has been sealed in a descending parallel channel pattern on the 4-hour chart, and COMP price just slid lower, nearly tagging the lower boundary of the technical pattern.

Compound would be able to discover immediate support at the downside trend line of the parallel channel at $274.80 before lower levels are anticipated. The following line of defense would appear at the 78.6% Fibonacci retracement level at $267.70.

Investors should note that COMP price is nearing oversold levels, as seen by the Relative Strength Index (RSI), which could see the buyers step in to purchase the token at lower prices. However, should the bulls lose confidence in Compound, an additional foothold may appear at the June 28 low at $248.60.

COMP/USDT 4-hour chart

If bullish investors manage to reverse the period of underperformance, COMP price could head higher toward the middle boundary of the technical pattern at $329.60 before obstacles start to emerge. The following hurdle for the DeFi token is at the 50 four-hour Simple Moving Average (SMA) at $338.40. 

A significant resistance zone will emerge at the 50% and 38.2% Fibonacci retracement levels at $363.30 and $402.80, respectively.