Cosmos (ATOM) emerges as the most important gainer among the many prime cryptocurrencies this Could 20, brushing apart the fears about its affiliation with Terra (LUNA), an algorithmic stablecoin venture whose market valuation fell by 99% last week.
Cosmos TVL down from $10M to $155K
ATOM’s price elevated by over 10% intraday to nearly $12. The positive factors appeared as part of a broader upside retracement that began on Could 12 when it had fallen to its eleven-month low close to $8. That marked round a forty five% price restoration in nearly a week.
The ATOM price rebound occurred despite its mum or dad chain, Cosmos Hub, witnessing huge capital outflows from its liquidity swimming pools. Notably, the entire worth locked (TVL) with Cosmos dropped to round $155,000 on Could 20, in comparison with its year-to-date excessive of over $10 million, according to Defi Llama.
Terra emerged as one of the first reasons behind the drop since its liquidity swimming pools made up 92% of the general Cosmos TVL as of Could 9. However on Could 20, the venture’s stake in the Cosmos ecosystem was simply round 17%.
In the meantime, a hawkish Federal Reserve had additionally contributed to the selloff across riskier assets final week, hurting cryptos like Bitcoin (BTC), Ether (ETH), and ATOM in tandem, as Cointelegraph lined.
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 formed an ascending triangle, a trend continuation indicator, as shown in the chart below.
As a rule of technical analysis, ascending triangles formed during a downtrend resolve after the price breaks below their lower trendline and continue falling until it reaches the level at length equal to the triangle’s maximum height.
Applying the same theory on Cosmos shifts ATOM’s downside target to $7.50 with the breakdown point around $10.35.
Bullish reversal scenario
In some cases, however, ascending triangles in a downtrend could lead to a trend reversal instead of continuation. Therefore, the bulls could attempt a breakout with a run-up to the triangle’s upper trendline near $12.50.
ATOM’s chance of constant its restoration is excessive if this happens significantly with rising 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.
In different phrases, the bullish state of affairs places ATOM’s price en path to $17.25 by June, up round 45% from Could 20’s price.
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