What’s behind the rerating of Cosmos?

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Written by SciTechNerds

February 14, 2021

What’s behind the rerating of Cosmos?

ATOM, the native cryptocurrency of the Cosmos blockchain protocol, has rallied by over 100% in the past week.

Analysts are attributing the rally of ATOM to 2 main elementary components. First, in recent weeks, layer one blockchain protocols, like Avalanche (AVAX) and Polkadot (DOT) have gone through a significant rerating.

Second, the utility of ATOM that allows holders of the cryptocurrency to earn through swap, gas, and transaction fees might make it extra compelling for traders.

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The rerating of layer-one blockchains

The term rerating is used within the cryptocurrency market to explain when the worth of a cryptocurrency rises quickly after stagnating for a prolonged period.

Sometimes, rerating happens when the market finds cryptocurrency is undervalued because of elementary causes or a sure catalyst buoys the potential of the blockchain protocol.

Cosmos is primed for a rerating as a result of different layer-one blockchain protocols, like Polkadot, have seen massive rallies throughout January and February.

As of Feb. 13, the valuation of Cosmos hovers at around $5 billion. As compared, Polkadot’s valuation is at around $27 billion, more than 5 times higher.

More importantly, in comparison with different layer one blockchain protocols, Cosmos has major decentralized platforms and blockchain projects launched on top of it.

Projects on top of Cosmos greater than ATOM

Most notably, Terra and Binance Smart Chain are both based on the Cosmos blockchain. The valuation of the 2 blockchain projects alone are above $22 billion.

Technically, BNB is the native token of each Binance Smart Chain and the Binance ecosystem, however nonetheless, the valuation of the 2 tasks alone surpass that of Cosmos.

A pseudonymous DeFi investor referred to as “SpiderCrypto” mentioned ATOM is undervalued in comparison with different blockchains. The investor said:

“Also @cosmos $ATOM is undervalued relative to other blockchains. So many great projects using tendermint / cosmos and you don’t even know anon. $10b marketcap and will explode like $avax.”

A pseudonymous Cosmos validator Immasssi additionally emphasised that the tokenomics of ATOM, which permits customers to benefit from the fees generated from the Cosmos ecosystem, makes ATOM extra engaging.

Just like DeFi projects which have money movement and a token that lets users earn by staking, the validator mentioned ATOM holders will earn transaction fees from packets routed through the Cosmos hub. He said:

“$ATOM holders will earn tx fees for packets that are routed through the hub. This includes all #data. Additionally atom holders will earn swap fees, gas fees & tx fees from the upcoming AMM. Furthermore earning from shared security. Once you realize what that means for ATOM.”

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ATOM vs. LUNA long-term sentiment rating. Supply: TheTie

Moreover, the long-term sentiment rating for ATOM has risen considerably this year alongside Terra LUNA’s, suggesting that the rerating of Cosmos could proceed, significantly if the DeFi sector continues to grow.

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