Most of the crypto market is down, but Cosmos (ATOM) is up – why?

Ethereum integration has finally happened. It’s over, and luckily it went off without any major hiccups. As many had predicted, the event turned out to be the real catalyst that pushed the market, either the “buy the rumor, sell the news” style, or perhaps the better-than-expected consumer price index print on September 12th. Current direction.

Whatever the reason for this week’s decline, the rally is over and the bulls are left with nothing on the horizon. Perhaps a new bullish narrative will emerge, or analysts will have to keep a close eye on modern money to see which asset they choose to turn to.

Remember, the “merger” was meant to be a wild event that, according to many “smart” people, could raise the price of Ether and the hardfork ETH POW tokens were meant to make several billion dollars a reality. Liquidity flowing into Bitcoin and helping the ailing asset move out of its current range.

Well, none of that happened. It doesn’t mean no, but the current reality is a market painted bright red. Bitcoin fell below $20,000 on September 15, triggering a correction in the market that resulted in double-digit losses for many altcoins and currently no easy story for investors to interpret as bullish.

Everything is not thrown away

There is something external, and its name is the ATOM. To the surprise of some, it is one of the few green assets on the charts on Christmas Day. Currently, the altcoin reflects a 9.4% gain and has rebounded strongly from the September 14 low at $13.19.

Previous analysis has shown how ATOM’s price trading in an uptrend channel, moving above the 20-day moving average and rising below the moving average reflects good buying opportunities. A simple technical analysis of ATOM price action focuses on:

  • ATOM price continues to make higher lows and higher highs while trading in an uptrend channel.
  • ATOM price saw a brief bull break outside the channel, tapping the 200-day moving average and correcting to the channel midline and 20-MA, each proving support.
  • After testing support, the price moved higher and traded in the current range and may retest the 200-MA to support the level.

Let’s briefly examine a few possible reasons behind ATOM’s bullish pace.

Related: Crypto traders will be looking at ATOM, APE, CHZ and QNT as Bitcoin flashes lower signals

Protocol migration, fluid retention, increasing TVL and IBC capacity

Several protocols were derived from Terra and relaunched on the Cosmos Hub SDK. In September, analytics firm and protocol developer Delphi Digital announced that it had chosen Cosmos as its main blockchain to build new projects.

When projects are built on the Cosmos Hub, the cost of converging to ATOM will often increase because Diffie protocols and other DApps will participate in the network interchain security system running on IBC. The Inter-Blockchain Communication Protocol (IBC) is essentially the “internet of blockchains” and a bridge that enables the cross-chain transfer of tokens and secure communication between different blockchains.

DApps, AMMs, and DeFi-style platforms typically built on blockchain provide inventory and the resulting fees are often shared among stakeholders.

Staking ATOM currently offers 17.75% API and according to Staking Rewards, it has a 66.75% circulating supply. Cosmos is about to launch liquid staking, an event that will increase the buying pressure on the ecosystem’s native token(s) as it applies to other DeFi platforms on other blockchains.

The data shows that the number of unique proxy addresses in the network is increasing.

7-day increments for special representative addresses on Cosmos. Source: Stacking Awards

A number of Cosmos ecosystem platforms, including COMDEX, are set to launch their own stablecoins (CMST), and assets locked and stored within the platform may be “returned” to the stablecoin’s $1 peg. Given the structure of the Cosmos Hub and IBC, it seems likely that ATOM will be one of the primary assets used in the “mining” process.

Of course, Total Value Locked (TVL) in the Cosmos ecosystem has fallen as DeFi and the broader crypto market succumb to a bearish trend. This figure has yet to rebound in any significant way, but the chart below shows significant gains over the past 7-days. This will be the number that will be tracked alongside the ATOM price.

Protocols in the Cosmos Hub (ATOM) ecosystem. Source: Defi Lama

Additional growth metrics that should raise investors’ eyebrows 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.

Protocol revenue, on the other hand, is the amount of transaction fees that go to the protocol, which are the owners of ATOM and possibly share a portion of this revenue with platform users and stakeholders.

Cosmos circulating market price and supply side income. Source: Token Terminal
Cosmos Broadcast Market Value and Protocol Revenue. Source: Token Terminal
Cosmos Circulating market cap and ATOM trading volume. Source: Token Terminal

Basically, what we see is Metcalfe’s Law in action. As the ecosystem grows, total value is locked and increased as the network grows, Liquid staking provides additional utility for held assets, which can be purchased, stockpiled, drawn into stablecoins or IOUs, and then looped around to fuel further growth in the ecosystem.

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