The ATOM price reaches the Cosmos, but why?

When a stock market crash occurs, assets become oversold and there is usually an “oversold bounce”, “mean reversion”, “mean reversion” or some rally in price down the range before the crash.

Subsequently, the asset studied consolidates, continues the downtrend or returns to the uptrend if the bearish catalyst was not large enough to break the market structure. This is all basic trading 101.

This week, Cosmos (ATOM) price seems to be following this path, and the altcoin is showing some strength with a 35% gain since August 22nd. But why ?

Depending on how you look at it, and technical analysis is by all means a subjective process, ATOM price is either in an ascending channel or it could be said that a rounded bottom pattern is present with price near break above the neckline.

ATOM daily chart. Source: commercial view

Resistance above $13 (the horizontal black line in the bottom chart) is currently about to be tested, and with sufficient volume and “stability” in the broader crypto market, price could be on the way to the 200-day moving average at $17.20.

Of course, if Bitcoin goes bankrupt on the daily close, or hawkish talk starts coming out of Jackson Hole, the entire bullish structure of ATOM is likely kaput. So if you are trading, be prepared and size accordingly.

If the price manages to reach the $17 zone, without skipping a beat, then your favorite technical analysts will say something like:

“If the ATOM price manages to swing the 200-MA to support, the continuation at the $27 level could occur.”

Surely you have seen this on Crypto Twitter lately, but let me find an example.

So it’s only, sir?

What traders need to know is if ATOM’s bullish momentum is simply the result of a “stable” market and Bitcoin and Ether trading within a relatively predictable range, or if there is a set fundamentals related to Cosmos that validate the current movement and justify opening a long swing.

Apparently, analysts at VanEck, a multi-billion dollar asset management fund, believe ATOM price will make a 160x move by 2030.

Hard to believe, isn’t it? The prediction might be a bit far-fetched, but see for yourself. Here is what they said:

“Based on our discounted cash flow analysis of the potential value of the Cosmos ecosystem in 2030, we have arrived at a price target of $140 for the ATOM token, with a decline to $1. With ATOM priced at $10 as of 02/08/2022, we like the 14 to 1 odds presented and believe this is a buying opportunity for the token.

Let’s take a quick look at their justification for $140 ATOM.

Product-to-market fit and secure cross-chain bridge could flourish post-merger

VanEck analysts Patrick Bush and Matthew Sigel cite Cosmos’ Inter-Blockchain Communication (IBC) protocol as a bullish catalyst, primarily because “blockchains separate from the Cosmos SDK can open communication channels to exchange data, messages, tokens and other digital assets”.

According to the analysts, “the IBC architecture then allows each blockchain to perform activities on another blockchain without relying on a trusted third party.” They continued:

“IBC’s permissionless and trustless communications technology solves many of the problems posed by trust bridging solutions that have led to over $1 billion in funds being stolen through bridge hacks.”

Analysts also cite the Cosmos SDK, the product’s clear market fit and strong token value accumulation being partially influenced by staking and a soon-to-be-launched “cross-chain security” mechanism by the Cosmos Hub as reasons for their outlook. long-term bullish. .

What’s happening on the development and roadmap side?

ATOM is set to become a primary collateral asset in three new stablecoins that will be launched in the Cosmos ecosystem.

Minting stablecoins will require “locking” or depositing ATOM tokens and according to the Cosmos Hub 2.0 roadmap, liquid staking is also expected to be rolled out in the second half of 2022.

Details of the ATOM roadmap. Source: Hub Cosmos

During the DeFi summer and post-summer revival, stablecoin issuance and liquid staking were two phenomena that boosted TVL for DeFi-oriented blockchains and, while debatable and somewhat Ponzi-esque, staking liquid adds buying pressure to a protocol’s native token, while also equipping it with utility in various aspects of the lending, borrowing, and leverage aspects of decentralized finance.

Staked percentage of ATOM’s circulating supply. Source: Staking Rewards

Current data from Staking Rewards shows 65.84% of ATOM tokens issued are staked for a minimum return of 17.85%, and additional data from the analytics provider shows an increase of almost 189% in the number of ATOM stakers in the last 30 days.

30-day increase in ATOM stakers. Source: Staking Rewards

The above seems to align with the thesis that liquid staking and stablecoin minting will be launched soon. Despite the confluence of these bullish indicators, it is important to remember that asset prices do not exist in a vacuum. While there may be a handful of bullish signals coming out of ATOM, the broader cryptocurrency market (including BTC) is hanging on a precipice.

No one is sure the elusive “bottom” is there and cryptocurrencies are risky assets that exist in a macro climate where most institutional and retail investors are risk averse. The value accumulation propositions for ATOM are strong, and staking, stablecoin minting, and liquid staking have proven to be strong bullish catalysts for DeFi tokens and altcoins in the past. But everything works until it doesn’t, right?

Remember Waves, Terra (LUNA) and Celsius (CEL)? All have experimented with liquid staking, loans, asset collateral and stablecoins, and yet today they are down from a value standpoint.

Of course Cosmos is not LUNA, Waves or CEL. It is a large ecosystem equipped with cross-chains with a market capitalization of $12.6 billion, according to data from CoinGecko.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.