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Tuesday, November 29, 2022

Cosmos price rebounds 45% in one week despite Terra’s debacle — what’s next for ATOM?

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Cosmos (ATOM) emerges as the largest gainer among the many prime cryptocurrencies this May 20, brushing apart the fears about its affiliation with Terra (LUNA), an algorithmic stablecoin challenge whose market valuation fell by 99% last week.

Cosmos TVL down from $10M to $155K

ATOM’s price elevated by over 10% intraday to virtually $12. The positive factors appeared as part of a broader upside retracement that began on May 12 when it had fallen to its eleven-month low close to $8. That marked round a forty five% price restoration in virtually a week.

ATOM/USD each day price chart. Source: TradingView

The ATOM price rebound occurred despite its dad or mum chain, Cosmos Hub, witnessing large capital outflows from its liquidity swimming pools. Notably, the full worth locked (TVL) with Cosmos dropped to round $155,000  on May 20, in comparison with its year-to-date excessive of over $10 million, based on Defi Llama

Terra emerged as one of the first causes behind the drop since its liquidity swimming pools made up 92% of the general Cosmos TVL as of May 9. But on May 20, the challenge’s stake in the Cosmos ecosystem was simply round 17%.

Cosmos TVL distribution. Source: Defi Llama

Meanwhile, a hawkish Federal Reserve had additionally contributed to the selloff throughout riskier property final week, hurting cryptos like Bitcoin (BTC), Ether (ETH), and ATOM in tandem, as Cointelegraph lined here.

ATOM price rebound sustainable?

From a technical perspective, ATOM stays on the threat of constant its decline in Q2/2022.

First, the Cosmos token’s 45% rebound accompanies a drop in its buying and selling volumes, suggesting a low dealer turnout behind the rally that, in flip, might result in a price reversal. Second, the price seems to have fashioned an ascending triangle, a pattern continuation indicator, as proven in the chart under.

ATOM/USD four-hour price chart that includes ascending triangle setup. Source: TradingView

As a rule of technical evaluation, ascending triangles fashioned throughout a downtrend resolve after the price breaks under their decrease trendline and proceed falling till it reaches the extent at size equal to the triangle’s most top.

Applying the identical concept on Cosmos shifts ATOM’s draw back goal to $7.50 with the breakdown level round $10.35.

Bullish reversal state of affairs

In some circumstances, nonetheless, ascending triangles in a downtrend might result in a pattern reversal as an alternative of continuation. Therefore, the bulls might try a breakout with a run-up to the triangle’s higher trendline close to $12.50.

Related: Contrarian Bitcoin investors identify buy zones even as extreme fear grips the market

ATOM’s chance of constant its restoration is excessive if this happens significantly with growing buying and selling quantity. In doing so, the upside goal for ATOM/USD might once more be on the size equal to the utmost distance between the triangle’s higher and decrease trendline, as proven under.

ATOM/USD four-hour price chart that includes ascending triangle’s reversal setup. Source: TradingView

In different phrases, the bullish state of affairs places ATOM’s price en path to $17.25 by June, up round 45% from right this moment’s price.

The views and opinions expressed listed here are solely these of the writer and don’t essentially replicate the views of Cointelegraph.com. Every funding and buying and selling transfer includes threat, you need to conduct your individual analysis when making a choice.