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The Ethereum merger has finally taken place. It’s over, and luckily it went well without any major hitches. As many predicted, the event turned out to be a “buy the rumour, sell the news” style event, or perhaps, hotter than expected. consumer price index printout September 12 was the real catalyst that pushed the market in its current direction.

Whatever the reasons for this week’s downturn, the meltdown is over and in its wake, the bulls are left with a lot of nothing. It’s likely that a new bullish narrative will have to emerge, or that analysts will have to watch smart money closely to see which assets they choose to turn to.

Remember, “Fusion“, according to so many “smart” people, was supposed to be a bullish event that would possibly push up the price of Ether and the treasury of hardfork ETH POW tokens was supposed to magically materialize several billion dollars of liquidity that would flow likely to Bitcoin and help the struggling asset break out of its current range.

Well, none of that happened. That’s not to say it won’t happen, but the current reality is a market painted bright red. Bitcoin’s September 15 drop below $20,000 induced a market-wide correction resulting in double-digit losses for the majority of altcoins and at the moment there is no easily understandable story. for investors to interpret as bullish.

Everything does not empty

There happens to be an outlier, and its name is Cosmos (ATOM). To some people’s surprise, it’s one of the few green assets on the charts on merge day. Currently, the altcoin is reflecting a 9.4% gain and it has rebounded strongly from its September 14th low at $13.19.

A previous analysis explained how ATOM price is trading in an ascending channel, sitting above the 20-day moving average and suggesting declines to and below the moving average reflected good buying opportunities. A simple technical analysis of ATOM’s price action would focus on:

  • ATOM price continues to make lows and highs while trading within the trendlines of an ascending channel.
  • ATOM price saw a brief bullish break outside the channel, mining the 200-day moving average, then correcting towards the middle line of the channel and 20-MA to confirm each 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 reverse the level towards support.

Let’s briefly look at some of the possible factors behind ATOM’s bullish momentum.

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

Protocol migration, liquid staking, rising TVL and the potential for IBC

A number of protocols moved away from Terra after its implosion and relaunched on the Cosmos Hub SDK. In September, analytics company and protocol builder Delphi Digital also announced that it had selected Cosmos as its primary blockchain to build new projects.

When projects build on Cosmos Hub, the accumulation of value for ATOM often results from the fact that DeFi protocols and other DApps will participate in the network’s cross-chain security system that runs on IBC. The Inter-Blockchain Communication (IBC) Protocol is essentially an “internet of blockchains” and a bridge that enables cross-chain transfer of tokens and secure interoperability between different blockchains.

Typically, DApps, AMM and DeFi style platforms built on blockchains offer staking and the fees generated by this are often split between the stakingrs.

Staking ATOM currently offers an APY of 17.75% and according to Staking Rewards, 66.75% of the available circulating supply is staked. Cosmos is set to launch liquid staking, a phenomenon that when rolled out to other DeFi platforms on other blockchains has led to increased buying pressure on the native token(s). of the ecosystem.

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

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

Several platforms in the Cosmos ecosystem, including COMDEX, are set to launch their own stablecoin (CMST), and it’s likely that assets locked and staked within the platform will “support” the peg of $1 of these stablecoins. Given the structure of the Cosmos Hub and the IBC, it seems likely that ATOM will be one of the main assets used in the “minting” process.

Of course, the Total Value Locked (TVL) within the Cosmos ecosystem crashed as DeFi and the broader crypto market succumbed to the downtrend. This number has yet to recover noticeably, but the chart below shows notable entries over the past 7 days. This will be a number to watch, alongside the price of ATOM.

Protocols within the Cosmos Hub (ATOM) ecosystem. Source: Llama Challenge

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

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

Protocol revenue, on the other hand, is the amount of transaction fees that accrue to the protocol, who are ATOM holders, and possibly share a portion of that revenue with platform users and stakers.

Cosmos circulating market capitalization and supply-side earnings. Source: token terminal
Cosmos circulating market capitalization and protocol revenue. Source: token terminal
Cosmos circulating market capitalization and ATOM trading volume. Source: token terminal

Essentially what we see is Metcalfe’s Law in effect. As the ecosystem grows, the network grows, the total value locked increases, liquid staking gives additional utility to the staked assets, which also enters a cycle of buy, stake, mint in stablecoin or IOU, then used within the ecosystem to fuel further growth.

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.