Most Crypto Market Drops, But Cosmos (ATOM) Price Rise – Why?

The Ethereum merger has finally happened. It was over, and luckily things went smoothly without any major hitches. As many expected, the event turned out to be a “rumor-buy-sell-news”-style event, or perhaps the hotter-than-expected CPI print on September 12th was the real catalyst that drove the market in the current direction.

Regardless of the reasons for this week’s pullback, the consolidation is over and in its wake, the bulls are left with not much in the way of nothingness. A new bullish story is likely to emerge, or analysts will need to keep a close eye on smart money to see which assets they choose to trade in.

Remember that the “merger,” according to many “smart” people, was supposed to be a bullish event that could drive the price of Ether higher, and the goal of the ETH POW trove token was to magically embody billions of dollars in liquidity that would potentially It flows into bitcoin and helps the distressed asset get out of its current range.

Well, none of that happened. This does not mean that this will not happen, but the current reality is a market painted in bright shades of red. Bitcoin’s September 15 drop below $20,000 triggered a market-wide correction that led to double-digit losses for the majority of cryptocurrencies, and at the moment there is no easy-to-understand story for investors to interpret as bullish.

Not everything is dumping

It happens that there is an anomaly, whose name is Cosmos (ATOM). To the surprise of some, it is one of the few green assets on the charts on the day of the consolidation. At the moment, the altcoin is reversing a 9.4% rally and rebounding strongly from its September 14th low of $13.19.

The previous analysis discussed how ATOM price is trading within an ascending channel, above the 20-day moving average and suggested that dips to and below the moving average reflect good buying opportunities. Simple technical analysis of ATOM price action will focus on:

  • ATOM price continues to achieve higher bottoms and higher tops while trading within the trend lines of the ascending channel.
  • ATOM price saw a short bullish breakout outside the channel, taking advantage of the 200-day moving average and then correcting back to the channel’s mid-line and the 20-MA to confirm both as support.
  • After testing the support, the price resumed the uptrend and is now trading at the top of the current range and is likely to retest the 200-MA in an attempt to flip the level to support.

Let’s briefly investigate some of the potential factors behind ATOM’s bullish momentum.

Related: Crypto Traders Eye ATOM, APE, CHZ, and QNT as Bitcoin Flashes Below Signals

Protocol relay, fluid storage, TVL elevation and IBC potential

A number of protocols pivoted away from Terra after its collapse and relaunch on the Cosmos Hub SDK. In September, the analytics firm and protocol builder Delphi Digital also announced that it had chosen Cosmos as the primary blockchain to build new projects on.

When projects are built on the Cosmos Hub, value buildup for ATOM often results because DeFi protocols and other DApps will participate in the mesh network security system that runs through the IBC. The Inter-Blockchain Communication (IBC) protocol is essentially the “Internet of the Blockchain” and a bridge that allows the transfer of tokens across the chain and secure interoperability between different block chains.

DApps, AMM, and DeFi platforms built on blockchains usually provide staking and the resulting fees are often shared between stakeholders.

Staking ATOM currently offers 17.75% APY and according to Staking Rewards, 66.75% of the available rolling supply is covered. Cosmos is set to launch Liquid Staking, a phenomenon that, when deployed to other DeFi platforms on other blockchains, has increased buying pressure on the ecosystem’s native token(s).

The data also shows a steady increase in the number of unique authorization addresses in the network.

7-day increase in unique authorization addresses on Cosmos. Source: Staking Rewards

Several Cosmos ecosystem platforms, including COMDEX, are set to launch their own stablecoin (CMST), and it is likely that assets locked and stored within the platform will “restore” the $1 peg of said stablecoin. Given the structure of the Cosmos Hub and the IBC, it seems likely that ATOM will be one of the primary assets used in the “minting”.

Of course, the Total Locked Value (TVL) in the Cosmos ecosystem has collapsed as DeFi and the broader crypto market succumb to a downward trend. This number has not yet recovered in a noticeable way, but the chart below shows noticeable inflows in the past seven days. This will be a number to watch, along with the price of ATOM.

Protocols within the Cosmos Hub (ATOM) ecosystem. Source: Devi Lama

Additional growth metrics that should surprise investors are Cosmos’ 180-day supply-side revenue, protocol revenue, and daily trading volumes.

Supply-side revenue reflects the amount of transaction fees allocated to validators while total revenue is the total transaction amount paid by users of the protocol.

On the other hand, protocol revenue is the amount of transaction fees that go to the protocol, who hold ATOM and possibly share a portion of that revenue with platform users and operators.

Cosmos generalization of market value and supply-side revenue. Source: token terminal
Cosmos traded market value and protocol revenue. Source: token terminal
Cosmos’s traded market capitalization and ATOM’s trading volume. Source: token terminal

Basically, what we’re seeing is Metcalfe’s Law in effect. As the ecosystem grows, the network grows, the total locked value increases, and liquid storage gives an additional benefit to the assets being hoarded, which also go into a cycle of buying, betting, or minting into a stablecoin or IOUs and then using them within the ecosystem to fuel additional growth.

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