Cosmos (ATOM) has weakened more than 10% since February 21, falling from $14.62 to a low of $12.83. The current price of ATOM stands at $13.13, which is more than 70% off from its 2022 highs that were registered in January.
The second week of February was highly positive for the cryptocurrency market; however, the landscape changed in the last few days. The cryptocurrency market started to lose value rapidly at the end of this week after the latest inflation data coming from the US.
Today, Crypto Lists will discuss Cosmos (ATOM) price estimates from a technical and fundamental analysis perspective. Please note that there are also many other factors to consider when entering a position, such as your time horizon, willingness to risk, and how much margin you have if trading with leverage.
Cosmos: exchange assets and data across blockchains
Cosmos is a decentralized network that enables blockchains to transfer data and tokens with each other while letting them retain their sovereignty. Before Cosmos, blockchains were unable to communicate with each other, while the technology of this network enables you to exchange assets and data across blockchains freely.
Developers Jae Kwon and Ethan Buchman co-founded the Cosmos network in 2014, but it is also important to mention that the Interchain Foundation (Swiss non-profit organization) helped develop and launch Cosmos. The ATOM token plays a key role in maintaining interoperability between all zones in the wider Cosmos network and can be used for staking, sending, holding, or spending.
By owning ATOM, users have the ability to vote on network upgrades, and each vote is proportional to the amount of ATOM they stake.
It is important to note that each new independent blockchain created within Cosmos is tethered to the Cosmos Hub which is powered by ATOM. As such, ATOM may become more valuable the more other blockchains are built within the network, but investors should consider there is currently no limit on the supply of new ATOM that can be created. Rather, Cosmos adjusts the number of tokens created based on the number of ATOM being staked.
The popularity of this project is rising, but the future success of Cosmos mainly depends on the flexibility of its strategy in response to the competitors’ moves. Cosmos is competing with some heavyweight players like Polkadot, and we can also not forget that regulations on the cryptocurrency market can be a threat to this cryptocurrency.
Where are we headed next?
The beginning of the 2023 year has been very successful for ATOM; however, the trend has changed in the last several days. ATOM has weakened more than 10% since February 21, and the risk of further decline for ATOM is not over.
Data on Friday showed the personal consumption expenditures (PCE) price index in the United States, the Fed’s preferred gauge of inflation, shot up 0.6% in January, and because of this, investors started to worry that the US central bank might raise interest rates by 50 bps in March.
“The headline and core PCE numbers were well above expectations. What worries us most is that the data since the last Fed meeting has been extremely strong. If the Fed had this data at the last meeting they probably would’ve raised by 50 bps, and the tone from the press conference would’ve been a lot different.”
– Gene Goldman, Chief Investment Officer, Cetera Investment Management
The federal funds rate is now in a range of 4.5% to 4.75% (the highest level since 2007), and the main question still remains how much time Fed will need to hold policy at restrictive levels in order to fight inflation. Many analysts are warning that Fed will hold interest rates at restrictive levels for longer, and because of this, they expect a recession that could hit financial markets even more.
Scott Wren, a senior global market strategist for Wells Fargo Investment, said that financial markets are likely to experience market turbulence in the upcoming weeks, and traders should keep in mind that the crypto selloffs could gather speed if Bitcoin falls again below the $20,000 mark.
Another negative news came from legendary billionaire hedge fund manager Ray Dalio, who called last week crypto a “speculative asset” as they don’t “replicate anything” and are “not an effective storehold of wealth.” Ray Dalio also said that while blockchain technology is excellent but it’s very important to distinguish it from a digital currency.
Technical analysis for ATOM
ATOM has weakened from $14.62 to $12.83 since February 21, 2022, and the current price stands at $13.13. ATOM might have a hard time holding above the $12 level in the upcoming days, and a break below this level would indicate that ATOM could probably test the price level at $10.
Important support & resistance levels for ATOM
On this chart (the period from May 2022), I marked important support and resistance levels that can help traders to understand where the price could move. ATOM remains under pressure, but if the price advances above the resistance that stands at $15, the next target could be $17.
The current support level is $12, and if the price breaks this level, it would be a “SELL” signal, and we have the open way to $11. If the price drops below $10, which represents an important psychological support level, the next target could be located around $8.
What speaks for the rise in the ATOM price
The last several hours have been poor for the cryptocurrency market, and cryptocurrencies have been suffering as data on Friday inflation shot up 0.6% in January. The cumulative market cap of all crypto assets has lost approximately $40 billion, and Bitcoin fell again below the $23,000 level.
The upside potential for ATOM probably remains limited for the upcoming weeks; still, if the price advances above $15, the next target could be $17.
It is also important to note that any news that gives hope that the Fed is becoming less hawkish is viewed as a positive for cryptocurrencies, and ATOM could advance from the current price level if the Federal Reserve hints at slowing the pace of rate increases.
What indicates further downfall for ATOM
Cosmos (ATOM) has remained under pressure since February 21, and despite this, market participants should be ready for another potential downward move. Latest inflation data indicates that the US central bank might raise interest rates by 50 bps in March, and as a result, the optimism of cryptocurrency investors fell again.
The current support level for ATOM stands at $12, and if the price breaks this level, the next target could be $11 or even below.
What do analysts and experts say
Fundamentals of Cosmos (ATOM) are strongly tied to the overall cryptocurrency market and pause in bullish momentum is connected to higher-than-expected US inflation data, the possibility of the Federal Reserve continuing higher interest rate hikes, and large amounts of long liquidations. According to crypto analytics firm The Block, investor sentiment rapidly fell, we could see a further downside in the Bitcoin price; and because of this, ATOM might have a hard time holding above the current support level that stands at $12.
Bloomberg Intelligence’s Senior Macro Strategist, Mike McGlone, said that the US stock market could see further losses over the coming weeks, and investors should consider that the crypto market displayed a high correlation with US equities.
Disclaimer: Crypto is extremely volatile and not suitable for everyone to invest in. Never speculate with money that you cannot afford to lose. The information on this site is presented for educational purposes only and should not be construed as investment or financial advice.