Cosmos (ATOM) Jumps 36% WTD: What’s Driving Its Price Rally?
ATOM rallied by up to 36 percent on a week-to-date timeframe as traders assessed the prospects of a major technological update on its parent blockchain Cosmos on February 18.
Dubbed as “Stargate,” the upgrade would enable Cosmos-based chains to connect using the first standardized protocol for inter-blockchain communication. With that said, chains will securely and trustlessly exchange data and token value with each other, making Cosmos the first global public ledger to achieve the mettle.
The Stargate upgrade would also introduce “Protobuf Migration” that aims to accelerate front-end development by including more transactions in Cosmos blocks, reducing gas fees, and supporting multiple programming languages.
“We expect [the] transaction throughput of the Cosmos Hub (and others that upgrade) to increase by 10x to 100x,” read the project’s official website. “This will be very important for the Cosmos Hub to handle an ever-increasing volume of cross-chain transactions. It also makes it easier on the nodes that run the network.”
Traders flocked into the ATOM market on Tuesday, anticipating that the euphoria around the Stargate upgrade would boost the cryptocurrency’s adoption among technologists and speculators alike. The cost to purchase one ATOM reached a new all-time high above $26 on Binance, up 36 percent this week and 220 percent in February.
Cosmos settles a new record peak ahead of the Stargate launch. Source: ATOMUSD on TradingView.com
Part of the reason is ATOM’s crucial role in running the Cosmos network.
It works as a settlement token for people who stake their assets in Cosmos liquidity pools. Meanwhile, holding it also gives them the right to introduce new proposals or vote to make fruitful changes to the Cosmos protocol. ATOM holders also benefit from the fees Cosomos generate by allowing transactions through its hubs.
— Blackbeard (@crypto_blkbeard) February 16, 2021
As the ATOM price rallies, analysts now expect the blockchain asset to refresh its record highs. Some anticipate that it would continue its push higher as more capital flows into it from Bitcoin markets, noting an imminent upside push in the highly-traded ATOM/BTC instrument.
Cosmos looks poised to grow by another 60 percent in bitcoin-enabled markets. Source: ATOMBTC on TradingView.com
“The higher high-higher low sequence [is] flipping resistances into support (latest at ~38k sats),” wrote Nico, an independent analyst. “[ATOM is] currently breaking above ~47k with a new spike in volume. “It is” looking good and still a long way toward ’20 highs (76k-60%).”
On the other hand, the ATOM market looks overheated at this moment, with its Relative Strength Indicator flying into an extremely overbought area. That typically leads to a consolidation trend if the fundamentals are strong or a downright bearish correction as traders dump the asset’s top.
Should the latter happen, the next downside target for ATOM/USD is near $18, based on the level’s history as a flippable support/resistance junction.