How To Short Compound (COMP)

    • James Page

James HeadshotAuthor: James Page - Last Updated on June 28, 2022

Summary: Shorting Compound is pretty straightforward, all you need is a cryptocurrency exchange that allows for short selling. While there are a few exchanges out there that have added the ability to short crypto, our recommendation is to use eToro. They’re well-known, have a global presence, and are trusted by millions of users from 100+ countries.

We’ll be using eToro in our guide, you can sign up with one of the sign-up buttons below.

Global: Sign up with eToro

USA: Sign up with eToro US

Compound

Before we get started, let’s quickly explain what shorting is (for those that are new to it). Shorting is the practice of selling a cryptocurrency hoping it will drop in price so you can buy it back later for cheaper… which, if successful, will give you a net profit.

It might sound a bit complex but don’t worry, it’s a lot easier than you might think.

How to Short Compound

Shorting Compound can be done in 4 steps:

  1. Find a crypto trading platform
  2. Sign up with the exchange
  3. Fund your account with fiat or crypto
  4. Short Compound

1. Find a cryptocurrency exchange

As mentioned before, for this guide we’ll be using eToro as they offer the ability to short the most common cryptocurrencies.

You can, of course, use any other crypto trading platform that allows for short selling.

etoro crypto

2. Sign up with the cryptocurrency exchange

Let’s start with creating an account on eToro.

Global: Sign up with eToro

USA: Sign up with eToro US

 

eToro sign up form

The sign-up process is very quick, as is the verification that needs to be completed afterwards so you can get started.

3. Funding your eToro account

Next is funding your account. You have several deposit methods to choose from when depositing funds into your eToro Account. These include a bank transfer, credit card, debit card, PayPal, and more.

4. Short Compound

These are the steps to follow to execute a short sell:

  1. Go to the search bar at the top, find Compound by entering the name.
  2. On the crypto page/section, on the right side, hit the TRADE button to enter the trading interface.
  3. At the top of the trading interface: Click on sell to short the crypto.
  4. Enter the amount for which you want to sell Compound and click on “Open Trade”.

Once you’re ready to close the trade, hopefully when the value of Compound has dropped, go to your Portfolio, find the Compound trade, and click on the red cross to close the trade.

If your assumption/prediction was right, then the profit will be added to your account after closing the trade. If you were wrong on the other hand, you’ll incur a loss which will be debited from your eToro account.

Congratulations, now you know how to short Compound!

Global: Sign up with eToro

USA: Sign up with eToro US

 

Disclaimer: Trading, investing, and dealing with digital and cryptocurrencies might involve a lot of risks. Their prices are volatile and performance is unpredictable. Their past performance is no guarantee of future performance.

Affiliate Disclosure: This site is supported by its users. We may receive commissions for purchases made through the links on our site. This does not impact our reviews, guides or comparisons.

 

Where to Short Compound (COMP)

Aside from eToro, the other major exchange you can use is Binance.

While Binance tends to be a bit more advanced when compared with eToro, they do have a lot more digital assets to trade with.

 

Frequently Asked Questions

Can I short Compound on Binance?

Yes, you can short Compound on Binance. They have over 300 cryptocurrencies on offer, have a decent phone app and a lot of advanced trading features.

About Compound

COMP is Compound Protocol's governance token. It has been distributed since June 2020. It is an ERC-20 token that was issued on Ethereum.

Compound tokens are mostly used to govern protocol. COMP tokens are used for protocol governance. They can be used to suggest, debate, implement, and even modify Compound without the need of the Compound staff. COMP gives its owner the ability to delegate voting rights for any address.

Compound allows users to lend or loan selected cryptocurrencies using a decentralized blockchain protocol. It creates money markets and algorithms for setting interest rates according to supply and demand.

Users will need their crypto assets to be able to lend or supply them on Compound. They will need deposit these assets into the Compound protocol. It will be combined into a liquidity pool. Users will receive cTokens as a return for making the deposit. Holding cTokens can lead to interest.

Once assets have been deposited with Compound users are permitted to use them as collateral. Compound can allow users to borrow up to $15,000 based upon the collateral factor. Because Compound uses an overcollateralization model, you can never borrow more than what is collateralized.

Compound acts in the same manner as a bank but is easier to access. Compound is not restricted to users who are willing to share their personal and confidential information. Anyone with an Internet connection can sign-up for Compound to begin interfacing with the protocol. They only need crypto assets to be stored in a wallet such as Metamask.

Compound also offers higher returns than traditional banks. You will get a mere 0.05% interest rate if your money is in a savings account. Compound offers up to 4% APY, depending on what assets are supplied.

Note that the Compound smart-contract carries extra risks, so the higher interest rate you are offered is because of this.

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