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

The Ethereum merger has finally happened. It’s over, and fortunately it went smoothly without any major hiccups. As predicted by many, the event turned out to be a “buy the rumor and sell the news” event, or perhaps the warmer than expected CPI print on September 12th was the real catalyst that pushed the market in its current direction.

Regardless of the reasons for this week’s decline, the consolidation is over and in its wake, bulls are left with a lot of nothing. It is likely that a new bullish narrative will have to emerge, or analysts will have to keep an eye on smart money to see which assets they choose to rotate to.

So now that it’s over, what’s the new narrative? Surge, guardian, purge or splurge? Maybe a lament?

— Galois Capital (@Galois_Capital) 15 September 2022

Remember that “The Merge”, according to so many “smart” people, was supposed to be a bullish event that would possibly send the price of Ether higher, and the treasure trove of hard-forked ETH POW tokens was supposed to magically materialize several billion dollars in liquidity that is likely to flow into Bitcoin and help the ailing 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 a bright shade of red. Bitcoin’s September 15 dip below $20,000 induced a market-wide correction that resulted in double-digit losses for a majority of altcoins, and at the moment, it’s not an easy story for investors to interpret as bullish.

Not everything is dumping

It happens to be an outlier, and its name is Cosmos (ATOM). To the surprise of some, it is one of the few green assets listed on Merge day. Currently, the altcoin is reflecting a gain of 9.4%, and it has recovered strongly from the September 14 low of $13.19.

Previous analysis discussed how the ATOM price is trading within a rising channel, above the 20-day moving average and suggested that dips to and below the moving average reflected good buying opportunities. A simple technical analysis of ATOM’s price action will focus on:

• ATOM price continues to make higher lows and higher highs while trading within the trend lines of an ascending channel.

• ATOM price saw a brief bull break outside the channel, hitting the 200-day moving average and then correcting back to the channel midline and 20-MA to confirm each as support.

• After testing 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 to support.

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

Related: Crypto traders watch ATOM, APE, CHZ and QNT as Bitcoin flashes at the bottom

Protocol migration, fluid input, an increasing TVL and the potential of IBC

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

When projects build on the Cosmos Hub, value addition to ATOM often occurs because DeFi protocols and other DApps will participate in the network’s interchain security system operating over the IBC. The Inter-Blockchain Communication Protocol (IBC) is basically an “internet of blockchains” and a bridge that allows cross-chain transfer of tokens and secure interoperability between different blockchains.

Typically, DApps, AMMs, and DeFi-style platforms built on blockchains offer stakes, and the fees generated from this are often shared between stakers.

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

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

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

Of course, the total value locked (TVL) in the Cosmos ecosystem collapsed as DeFi and the broader crypto market succumbed to the bear trend. This number has yet to recover significantly, but the chart below shows notable inflows over the past 7 days. This will be a number to keep an eye on, along with ATOM’s price.

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

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

Protocol revenue, on the other hand, is the amount of transaction fees that go to protocol, which is the holder of ATOM and possibly shares a portion of this revenue with platform users and stakers.

What we see is essentially Metcalfe’s Law in effect. As the ecosystem grows, the network grows, the total value locked increases, liquid staking adds additional utility to staking assets, which also enter a cycle of being purchased, staking, minted into stablecoins or IOUs, and then used in the ecosystem to power further growth.

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