What happened
The cryptocurrency market is on track to end 2021 with a day of sell-offs. Aave's (AAVE +1.21%) token got caught up in the pullback and was down roughly 3.6% over the previous 24 hours of trading as of 4 p.m. ET, but there were a handful of application-backed cryptocurrencies that are managing to push through the bearish pressures.
While their gains were relatively muted compared to days with even bigger moves, Arweave's (AR +4.11%) AR token and Cosmos' (ATOM 0.73%) ATOM token are among the top-performing major cryptocurrency tokens over the last day of trading. Arweave's token has climbed roughly 4.2% over the last 24 hours of trading, while Cosmos' token is up roughly 2.5% across the stretch.
Image source: Getty Images.
So what
After months of stellar gains, most cryptocurrencies hit a patch of bearish volatility in December. There doesn't appear to have been anything major driving the valuation pullback in the cryptocurrency space on Dec. 31, but investors have generally been adopting a more cautious stance toward high-risk plays.
The Aave token is just one of many casualties in Friday's year-end pullback, with market-leading crypto tokens Bitcoin and Ethereum also down roughly 2.7% and 1.9%, respectively, as of this writing. The Aave token is now down roughly 9.5% across the last seven days of trading, while Arweave's AR token is off roughly 1.7% over the stretch.
While most cryptocurrencies have posted significant sell-offs over the last seven days, Cosmos' ATOM token is a notable exception. The ATOM token has gained roughly 9.4% over the last week, and it seems to be attracting attention as investors look for networks that can push the overall blockchain, decentralized finance, and cryptocurrency spaces forward.
Cosmos' ATOM token has now surged roughly 400% across the last year of trading. Cosmos provides services that help to bridge data between separate blockchains, which could prove very valuable and help drive pricing increases for its token as the cryptocurrency and blockchain-services markets continue to evolve. New blockchain and cryptocurrency projects seem to pop up every day, but most of these ecosystems are siloed off from other networks.
If the blockchain services market is going to continue to develop and attract attention from businesses and individual users, there's likely going to be increasing demand for interoperability between networks. Cosmos isn't alone in aiming to provide these kinds of features, but it's been showing signs of impressive adoption momentum and now has 262 apps and services that are using its network.
Now what
In the context of historical trends, investors shouldn't read too much into today's movements in the cryptocurrency space. The broader crypto market is predisposed to high levels of volatility, and it's not unusual to see tokens posting even bigger moves even when there is no news to drive pricing action. However, while today's sell-offs for top cryptocurrencies might not tell investors much about the outlook for digital tokens overall, the fact that Arweave and Cosmos managed to post significant gains could be a sign that support is building behind these networks and their respective tokens.
Crypto investors should probably move forward with the expectation that pricing for digital tokens will once again be highly volatile in 2022. The overall combined valuation for cryptocurrencies roughly tripled across 2021's trading, and that sets up high expectations this year. While it's possible that some cryptocurrencies will once again post stellar gains thanks to the strength of their underlying applications and services or due to continued speculative momentum, the risk profile in the space seems to have risen. After such stellar performance in 2021, there's a lot to prove in the new year, and investors may want to be selective about which crypto tokens they put their money behind.
