Despite occasional rebounds, Cosmos (ATOM) has yet to completely exit the correction it has faced since the beginning of the year. ATOM’s price has decreased by 40% this year, painting a telling picture of a lack of buying pressure.
In a bullish market, this type of correction encourages traders to bet big on a notable bounce. While ATOM has risen slightly, the bulk of open positions in the market are bearish, signaling a vote of no-confidence on the altcoin.
In this analysis, CCN checks if the token has reached its maximum pain point or if the decline will continue. Let’s find out.
ATOM Bears Remain in Control
ATOM’s price climbed from $6.18 to $7.42 within the first three days of this year. However, after showing a glimpse of rising toward the $10 mark, the altcoin price fell to $3.58 earlier today.
As the price continued to trade lower, it formed a falling wedge on the daily chart. The formation of the falling wedge shows the token at lower highs and lower lows while supposedly hinting at a bullish turnaround.
However, the token might struggle to erase some losses despite the pattern. One indicator that aligns with this is the Awesome Oscillator (AO).
The AO is a technical indicator that employs recent historic and recent price movements to measure momentum. As of this writing, the AO reading is negative, indicating bearish momentum.
If sustained, this might make it difficult for ATOM’s price to break above the upper trendline of the wedge. The Bull Bear Power (BBP) also shows that the sustained breakout might not happen.
The BBP compares the strength of bulls (buyers) to bears (sellers) in the spot market. When the reading is positive, bulls have the upper hand. But in this case, the BBP is in the negative territory, indicating that bears are in control.
Should this remain the same, ATOM’s price might remain trapped within the falling channel. However, the dominance of bears is not just limited to the spot market.
Longs Fade, Shorts Rise
According to Santiment, the funding rate also shows that most traders are bearish on ATOM’s short-term potential.
The funding rate is the cost of holding an open position in the derivatives market. It also serves as a barometer of traders’ sentiment.
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When positive, the metric shows that long (buyers) are dominant. However, for ATOM, the rate has dropped to -0.022%, indicating that shorts (sellers) have more open positions. Demand for long derivative contracts has completely faded.
Due to this state, demand for long derivative contracts might continue to fade, possibly challenging ATOM’s potential to rebound.
ATOM Price Recovery Lacks Momentum
Zooming into the technical perspective again, the 4-hour chart shows that ATOM is flirting with the 20-period Exponential Moving Average (EMA).
However, the price, at $3.88, is below the 50 EMA (yellow), indicating that the token does not have a clear path to recovery yet.
With low trading volume, ATOM’s price is likely to experience a pushback. If this happens, the value could decline below the 20 EMA (blue), possibly erasing the chances of recovery.
Using the Fibonacci retracement indicator, this possible drop below the key support might send ATOM’s price down to $3.38. In the mid-term, the cryptocurrency’s value risks dropping toward $2.50.
On the flip side, the trend could become bullish if ATOM breaks above the 50 EMA.
In that scenario, the value might rise to $5.47. In a highly bullish scenario, it could climb toward $6.77.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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