Cosmos has become an integral part of the crypto sphere. It defines itself as a player that aims to provide solutions to the hardest problems faced by the industry. This pertains to the issue of speed, scalability, and a user-friendly environment like the one used by Bitcoin. Needless to say, its objectives are to make blockchain technology less complicated and easier for others to leverage.
Cosmos crypto (ATOM) emerges as a native token to the ecosystem of Cosmos. It ranks in the top 50 cryptocurrencies all over the world in terms of market cap. However, it has risks associated with it just like every other crypto token in the market. Investors need to understand these risks before allocating a portion of their funds to ATOM token.
Overview of Cosmos (ATOM)
The role of Cosmos, as stated by the Cosmos ecosystem itself, is to fill the gap by resolving complexities in blockchain technology. Thereby, boosting its growth and adoption in the industry. Some of the key features that Cosmos blockchain aims to promote are scalability and interoperability, to mention a few.
ATOM coin plays a vital role in the ecosystem as a native token. It backs gas payments and can be earned via a hybrid PoS algorithm. Holders of ATOM essentially contribute to the security of the blockchain.
Market Volatility and Price Fluctuations
If crypto market trends suggest anything then it is that volatility and fluctuations are normal occurrences in the industry. Cosmos price swings have, in recent times, shown green trades as well as red trades. Meaning, investors have banked profits but have also lost some of their funds.
ATOM has, in the past, seen swings that have taken the value as high as $12.29 and as low as $4.44. One of the factors is the market crash that happened in the middle of August this year. That caused prices to fall for every cryptocurrency.
ATOM price volatility is currently at 4.71% which is comparatively lower. Market sentiments are bullish for the future of crypto and blockchain. BTC and ETH marking upticks have pulled every possible crypto for a surge. ATOM is following a similar trail. Developments like rate cuts will further help ATOM to gain value as investors would want to get on board with the crypto sphere.
Technological Risks
There are several drawbacks and technological risks associated with Cosmos. One of them is Inter-Blockchain Communication (IBC) risks. Risks related to the development and adoption of the Cosmos ecosystem are low decentralization, limited development resources, and duration of staked ATOM tokens. While it commits to resolving the blockchain scalability issues, it does have an underlying challenge of maximizing profits for investors.
Cosmos network risks are further associated with the SEC wherein the agency has reportedly accused the platform of hosting an unregistered security. Nevertheless, it remains in a better condition than Ethereum when it comes to the speed of transactions.
Regulatory and Legal Risks
The regulatory landscape is majorly looked at by the US Securities & Exchange Commission. It was earlier seen categorizing the token as an unregistered security. Thereby, adding legal risks of ATOM in the books. There is a need for government regulation of blockchain but that pertains to offering a little more clarity about operations and recognition so that users and investors are confident with their participation.
Crypto regulation of any kind goes on to impact the price performance of a digital token. It has, for now, brought Cosmos price prediction to $3.84 in the next 30 days. That will be a decline of 12.54% from the current value. ATOM remains poised to end the year at around $4.67, or at $3.58. Regulations have affected tokens like XRP in the past. It was only after settlement that Ripple breathed fresh air although it was confident about the victory.
Security Concerns
There are crypto hacking risks like phishing that are done to drain the ecosystem of its funds. The number of malicious actors is on the rise and an ideal approach is to continuously publish warnings about engaging with an unknown source. Blockchain security is a major concern not just for Cosmos but for every other player in the market. A reason why Cosmos network security is widely talked about is because it lacks decentralization due to its validation nodes.
Measures to protect against hacks and security threats require Cosmos to perform regular audits of the network. Another famous way is to host hackathons wherein participants attempt to bring out vulnerabilities that can be fixed before they are exploited by hackers. Another way is to integrate third-party players for an outside regulation and perspective.
Conclusion: Is Cosmos High Risk?
The Cosmos investment risk is, at the moment, low in comparison to others. The risk assessment of Cosmos does highlight areas where it should focus but the token, ATOM, could eventually turn out to be less risky. Fluctuations happen within a specific range unless there is a heavy influence of market forces like the crash that happened in the previous month (August 2024). It is recommended to perform a risk assessment and do thorough research before investing in ATOM, or any other crypto for that matter.
Is ATOM safe? Technically, no crypto is ever safe given the way regulators rigorously work to safeguard the interest of investors.
