How to buy Compound online
This is an introductory guide to Compound, where you can find out what it is and how it works. If you’re interested in learning more about the software or just want to buy the COMP coin, this is a good place to start.
Compare where to buy Compound, and open an account
If you’re ready to buy straight away, sign up for one of the brokers below. These are some of the top crypto brokers around, that have been vetted and reviewed by our team of experts. If you want to learn more about Compound before you buy, keep reading.
What is Compound?
Compound is software that lets you borrow and lend cryptocurrency. Anyone can take out a loan or deposit coins and start earning interest instantly, without needing the approval of a financial institution. It uses the COMP token as an incentive, to reward those who provide liquidity or pay off their loans on time.
Compound is a key player in the growing world of decentralised finance. Offering loans without things like credit checks and a place to earn interest on crypto assets is already quite big business. Since 2018 it has raised over $30m in a series of funding rounds and the Coinbase exchange is a notable early backer.
How does Compound work?
Compound works by calculating interest rates based on supply and demand. These interest rates are an incentive: the less of a particular coin there is staked on the platform, the higher the interest rate on offer for depositing yours. The principle works in reverse, as it’s cheaper to borrow a coin with plenty of supply.
This creates liquidity, as does the fact that you have to post collateral (in the form of another cryptocurrency) to be able to borrow. The other main feature is that when you deposit coins to earn interest, you are returned tokens that correspond to its value, which you can then loan, deposit, or stake elsewhere while still earning interest.
How to buy Compound online – a step-by-step guide
Step 1. Find an exchange to buy Compound
If you want to buy coins, an exchange is usually the best bet. This is especially true for anything beyond the top five or ten coins, when an exchange might be your only option. Exchanges boast a range of features but look for one you can trust with the widest variety of coins available. Two of our favourites are:
- Binance: Binance manages the most trading volume, with millions of trades every day. It’s also usually the first port of call if you can’t find a coin elsewhere, with hundreds of different pairs available. Sign up for Binance now >
- ChangeNow: ChangeNOW lets you buy crypto using fiat currency, and swap one cryptocurrency into another across nearly 200 individual crypto tokens. It also integrates with other leading exchanges to offer you the best price. Join ChangeNow today >
Step 2. Sign up and fund your account
When you’ve chosen an exchange, the next thing to do is create an account. You won’t be able to buy anything until you’ve done so, but all you need to provide is a few contact details and a form of photo ID for verification.
The last step before you buy is to deposit some money into the account. Most exchanges let you do this with fiat currency (like GBP or USD), while others may only accept cryptocurrency deposits.
Step 3. Buy Compound
The buy step is simple: search for the relevant pair on your chosen exchange and hit buy to execute the trade. To find the pair you need the ticker for the coin you’re buying and the currency you’re swapping it for, so it could be COMP/BTC in this case.
Step 4. (Optional) Get a suitable wallet
Once you’ve successfully bought some coins, you need to decide where to store them. You can leave them in your exchange account, and this is fine if you only have a small holding. For some extra security, think about getting a wallet. Wallets store your coins so they can only be accessed with a private key that’s unique to you.
Here are two of the top wallets around:
- FreeWallet: FreeWallet is an online wallet that lets you access your coins through your web browser or a mobile app. It also integrates with an exchange so that you can trade coins straight from your wallet. Sign up for FreeWallet >
- StrongCoin: StrongCoin is a ‘hybrid’ wallet, a combination of an online wallet with an offline one that stores your coins on its central servers. Join StrongCoin today >
How to trade Compound – a step-by-step guide
Step 1. Find a broker
If you want to trade cryptocurrency, you need a broker. You should choose one with low trading fees, as short term trading means opening and closing lots of positions regularly and high fees can be a big drain on your finances.
Step 2. Deposit money
Brokers only accept deposits in fiat currency but they often charge for them as well. Similarly, they can charge for withdrawals too, along with trading fees. Before you sign up to anything, check the fee structure so you aren’t caught out by any surprises.
Step 3. Decide how you’d like to trade
Most people trade coins using contracts for difference, also known as CFDs. This is a way of predicting the price movement of a coin without owning it outright, and if you’re just going to be getting in and out of trades quickly, CFDs might be the best way to go.
Step 4. Start trading
Before you start trading for real, think about whether you want to start with a demo account. Demo accounts let you trade with pretend money rather than putting your own capital at risk and almost every broker worth using will offer one. Often, it’s a case of clicking a button in your settings, so have a look.
The trading itself is quite simple, as you have to decide whether a coin is going to go up or down. If you think it’s going to go up, then you should buy it, which is also known as ‘going long’. The opposite is ‘going short’, if you think a coin is going to fall in price.
One other strategy worth knowing about is trading with leverage. This is best left to more experienced traders but it means putting down a deposit so you can make trades at many times its value. This can lead to big wins, but also big losses if the market moves against you.
If you’re still not sure whether to buy, don’t worry. You should always take some time to think about an investment, particularly when it comes to cryptocurrency. Below is a summary of Compound’s pros and cons, followed by a few more questions to help you.
- Earn interest on your coins or take out a loan
- You earn extra COMP tokens for participating in the platform
- Its use of ‘ctokens’ means you can still use your coins while they’re deposited
- It has been criticised for not being fully decentralised
Finally, use the answers to these final three questions to help you decide whether to invest in Compound.
1. Is it a good time to buy Compound?
It depends on what sort of investor you are or whether you’re looking to actually use its services. If you’re the latter, it might be a good idea to buy now as you can vote on governance issues if you own coins.
Otherwise, if you’re looking to buy or trade to try to make a profit, it all starts with the coin’s price right now. If you’re a bullish long term investor, you might decide that it’s unlikely to go any lower, in which case you should buy it now. Traders with a more short term view can use charts and tools to try to time their entry into the market. Either way, you can use our latest market analysis to help you:
Compound (COMP) price analysis: A correction or end of the rally?
Compound (COMP) price remains in a bull market. Here are the important support and resistance levels
Compound (COMP) price is down 65% since August, here’s where it may stop
2. What problem does Compound solve, and what are the coin’s investment prospects?
Compound solves the problem of borrowing and lending without the need for a bank. It incentivises people to stake their coins on its software to earn interest or to borrow other cryptocurrency and sets interest rates based on supply and demand.
Decentralised finance is growing fast and Compound is a well-established part of the industry. If that growth keeps up, its investment prospects look good. There are other lenders out there, like AAVE, who are worth comparing it against in terms of price and the services they offer, but the fact Compound is already backed by serious investors is a positive sign.
It’s worth noting that things change fast in cryptocurrency and there are no guarantees. It’s important to do your research before investing and to stay on top of the news as long as you hold a coin. We’ve covered the latest news you need to know about right here:
Compound (COMP) welcomes multi-chain future with testnet
Is Compound (COMP) a good buy at the moment?
Compound (COMP) prepares to create new cross-chain protocol
3. Do you want to hold Compound for the long term?
There are positives to holding long term just as there are for short term trading. It depends on what sort of investor you are, how active, and your appetite for risk. We’ve summarised the key things you need to know, however you like to invest.
Considerations for a long term investment strategy
\If you’re bullish on the future of decentralised finance, investing in Compound can be a great way of getting in on the ground floor. In that case, buy coins through an exchange and think about using a wallet to store them.
Considerations for a short term trading strategy
Short term investing is about using volatility in the market to your advantage. The aim is to make lots of trades and a little bit of money quickly and often. To trade this way, you should sign up to a broker with low trading fees, and think about using CFDs and leverage to trade.