5 things to know before you buy Cosmos (ATOM)

For the cryptocurrency sector to realize its maximum potential, seamless communication between blockchains, referred to as "interoperability," is indispensable. Cosmos (ATOM) stands among the blockchain platforms addressing this challenge, having garnered attention from prominent cryptocurrency ventures. Investors should take note of the following details.

It has surged by nearly 370% this year

Cosmos hit a record high of $44.59 on September 19th, but has since experienced a slight decline. Nevertheless, as of the current writing, Cosmos has surged by nearly 370% since the beginning of the year, as per CoinMarketCap data. While this rise is notable, it appears less staggering when considering that the overall global market capitalization of cryptocurrencies has risen by almost 140% during the same timeframe.

The volatility of cryptocurrencies implies the potential for both significant gains and losses. Therefore, it's crucial to invest only funds you can afford to lose and be comfortable with the associated risks.

Referred to as the "interconnected network of blockchains"

A significant challenge in the cryptocurrency realm is the limited ability of individual blockchains to effectively communicate with one another. This presents a hurdle to the vision of seamless and cost-effective global transfer of crypto assets. To illustrate, it's akin to Walmart exclusively accepting Visa payments while Whole Foods only accepts Mastercard.

This underscores the importance of interoperability. Cosmos is centered around addressing this issue, earning it the reputation of being the internet of blockchains. Additionally, Cosmos is designed for scalability and efficient transaction processing, with claims of each transaction costing $0.01. For comparison, in March, CoinMetrics reported that the median fee on Ethereum (ETH) was approximately $10.

Over 255 applications are operational on its network

Adoption holds significant importance for any cryptocurrency. Exceptional technology holds value only when utilized. Hence, it's reassuring to observe Cosmos hosting 255 applications on its network, featuring prominent platforms like Binance Smart Chain and Crypto.com.

Investors should closely monitor the fee model of Cosmos. Unlike Ethereum, which generates revenue by levying transaction fees in ETH across its network applications, Cosmos operates differently. For instance, users of Crypto.com pay fees for Cosmos applications using its native token (CRO), not ATOM.

Other blockchains operate within this domain

Understanding the competitive landscape is crucial regardless of the investment. In the context of Cosmos, this involves examining interoperability blockchain solutions and programmable blockchains.

Other significant players in interoperability include Polkadot (DOT) and Avalanche (AVAX). While operating with slight variations, both have also experienced substantial price surges this year. Notably, AVAX has surged by approximately 2,000% since January 1st.

Regulatory factors may pose challenges for the decentralized finance (DeFi) sector

Decentralized finance (DeFi) comprises various services eliminating intermediaries like banks. Several applications on Cosmos' network fall within this realm.

Presently, regulators express concerns that these services function akin to banks but lack the same consumer safeguards. From the SEC to the Treasury, there's a rising call for heightened regulation. While the exact nature of this regulation remains uncertain, it could affect any cryptocurrency with DeFi ties, particularly if it's stringent.

Cosmos stands out as a robust cryptocurrency addressing a critical issue within the crypto sector. Its capability to interconnect blockchains enables individual cryptocurrencies to specialize in distinct areas, while collaborating with other blockchains possessing complementary strengths. This approach negates the necessity for each currency to solve all challenges independently to thrive.

Nevertheless, regulatory uncertainty looms large over the industry. Crypto investors must remain vigilant about the potential ramifications this uncertainty could exert on the market.